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THE  LIBRARY 

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LOS  ANGELES 


Th^ 


RLP'5 


ILV^R  l^U^STION 


5ACOI3  PIATT  PUNN 


Frank  H.  Smith, 
f  rinter  and  Binder,  22  N.  Pennsylvania  St.,  Indianapolis 

1894. 


COPYRIGHT,   1894, 

BY 

JACOB    PIATT    DUNN. 


r^6 


The    VioAh'^    SiUe;f   ^h^^fion. 


I. 

The  Coinage  Clock. 


I  take  it  that  the  adjustment  of  the  coinage  of  a 
country  is  much  like  the  regulation  of  a  clock.  A 
clock  is  regulated  in  order  that  it  may  run  properly, 
and  keep  time,  without  any  further  tinkering  than 
winding  it  up  at  intervals.  A  properly  adjusted  coin- 
age will  perform  its  functions  without  any  tinkering 
other  than  the  occasional  addition  to  its  volume  to 
replace  lost  coins,  or  to  meet  the  increasing  demands  of 
commerce.  Ordinarily  when  a  clock  is  out  of  order  we 
send  it  to  a  clockmaker,  but  sometimes  there  is  no 
clockmaker  at  hand,  and  such  a  concurrence  of  events 
brought  about  the  great  controversy  over  the  village 
clock  of  Schnitzendorf,  which  is  recorded  in  the  Travels 
of  Erasmus  Wilberforce.* 

This  clock  had  been  in  use  in  the  village  for  more 
than  a  century,  and  therefore  was  regarded  with  great 
affection  and  veneration  by  the  villagers,  but  for  some 
reason  it  began  to  lose  time,  and  grew  worse  from  day  to 
day  until  it  lost  an  hour  in  every  twenty-four.  A  com- 
mittee from  the  village  council  made  an  investigation,  and 
reported  that  in  their  opinion  the  trouble  was  due  to  a 
wheel  that  had  become  worn.  The  village  minister, 
who  was  about  journeying  to  I^uremburg  to  attend  the 

Note.— Vol.  i,  p.  196;  Vol.  a,  p.  83. 


synod,  was  therefore  authorized  to  purchase  another 
wheel,  but  on  his  return  announced  that  he  could  find 
no  wheel  like  the  one  to  be  replaced.  There  were  wheels 
of  the  same  size,  but  they  did  not  have  the  same  number 
of  cogs.  There  were  wheels  having  as  many  cogs,  but 
they  were  not  of  the  same  size.  This  report  caused 
general  consternation,  and  the  villageUouncil  was  con- 
sidering what  to  do  next  when  Mr.  Wilberforce  first 
visited  the  place.  I  cannot  reproduce  in  full  the  valu- 
able debate  on  the  subject,  but  will  give  a  summary  of 
its  more  important  features,  and  persons  of  an  inquir- 
ing turn  of  mind  can  consult  his  work  if  they  desire 
details. 

One  gentleman  was  in  favor  of  getting  a  wheel  of 
the  proper  size,  without  regard  to  the  cogs.  He  argued 
forcibly  that  the  clock  would  not  run  properly  if  the 
wheel  were  either  too  large  or  too  small.  The  village 
could  not  afitbrd  to  be  controlled  by  the  fancies  of 
ISTuremburg  clockmakers  in  regard  to  cogs,  for  if  it  did, 
Schnitzenburg  would  have  to  alter  the  clock  every  time 
the  clockmakers  introduced  a  new  style  of  wheels.  He 
believed  in  local  self-government,  and  would  never  vote 
to  submit  to  outside  dictation. 

Another  member  agreed  fully  in  the  spirit  of  the 
remarks  of  the  first  speaker,  but  insisted  on  purchasing 
a  wheel  with  the  proper  number  of  cogs.  He  showed, 
by  extracts  from  a  work  on  clocks,  that  a  clock  cannot 
keep  time  unless  the  wheels  have  the  right  number  of 
cogs,  but  that  no  two  wheels  were  of  the  same  size. 

A  third  member  regretted  the  tendency  toward 
radicalism  that  had  been  displayed  in  the  matter.  This 
clock  had  been  used  by  all  the  fathers  of  the  village. 
His  own   grandfather  had  for  years  been  entrusted  to 


wind  it.  It  had  come  down  to  them  hallowed  by  a 
thousand  sacred  memories.  It  should  not  be  marred  by 
sacrilegious  hands.  As  for  him,  he  stood  by  the  teach- 
ings of  the  fathers,  and  was  opposed  to  any  change 
whatever. 

The  speaker  who  followed  also  opposed  any  change, 
although  he  admitted  that  the  clock  was  found  to  be 
half  an  hour  slow  every  morning,  after  being  set  right 
the  night  before.  He  said  that  those  who  demanded 
the  change  were  greedy  capitalists  who  wanted  laboring 
men  to  go  to  work  half  an  hour  earlier. 

Another  member,  also  devoted  to  the  interests  of 
labor,  indignantly  denied  this  assertion.  He  demon- 
strated that  although  workingmen  went  to  work  half  an 
hour  later,  they  were  obliged  to  continue  work  half  an 
hour  longer  than  before  on  account  of  the  clock's  loss 
during  the  day.  After  a  brief  consultation  with  the 
preceding  speaker,  however,  he  announced  that  they 
would  both  vote  to  leave  the  clock  as  it  was,  provided 
it  be  set  each  day  at  5  p.  m. 

The  next  speaker  protested  against  any  expendi- 
ture on  account  of  the  clock.  In  the  entire  history  of 
the  village  there  had  been  no  such  expenditure,  and  an 
over-taxed  people  would  not  submit  to  it  now.  It  was 
agreed  that  the  clock  lost  an  hour  each  day,  and  all 
that  was  necessary  was  to  direct  the  clerk  to  prepare  a 
schedule  showing  just  how  slow  it  was  at  each  hour  of 
the  day.  The  people  could  then  easily  calculate  the 
correct  time  without  any  expense. 

The  economic  policy  was  opposed  by  another  mem- 
ber who  maintained  that  an  enlightened  people  never 
objected  to  necessary  or  beneficial  expenditures.  The 
people  of  his  district  believed  that  the  clock  needed  a 


new  key,  and  he  had  pledged  himself  to  vote  for  one. 
He  regretted  to  see  that  some  members  who  had  advo- 
cated a  new  key  before  the  people  were  now  opposed 
to  it,  but  he  proposed  to  be  consistent,  and  to  carry  out 
his  campaign  pledges. 

Finally  Von  Schermerhorn  arose.  He  had  the 
reputation  of  being  a  safe  and  conservative  leader,  and 
was  supposed  to  be  especially  versed  in  time  because 
he  had  long  been  the  leader  of  the  village  choir.  He 
said  he  was  sorry  to  see  such  diversity  of  opinion  on 
this  important  question,  but  must  admit  that  there  was 
great  weight  in  all  the  arguments  advanced.  For  him- 
self, he  was  opposed  to  going  to  extremes.  He  had 
learned  from  the  janitor,  who  had  been  making  some 
experiments  on  the  clock,  that  if  one  of  the  weights 
were  removed  the  clock  lost  only  half  an  hour  each  day, 
and  this  was  conformable  to  reason  because  the  com- 
mittee had  reported  that  the  source  of  the  trouble  was 
the  wearing  of  a  wheel,  and  this  wearing  must  have 
been  caused  by  the  pulling  of  the  weights.  He  was 
willing  to  go  to  the  extent  of  reducing  the  loss  of  time 
one  half,  and  if  the  result  was  satisfactory  to  the  people 
more  weights  could  be  taken  off  later  on.  He  there- 
fore moved  that  one  of  the  weights  be  removed ;  that 
the  clock  be  set  at  5  p.  m.  each  day ;  that  the  clerk  pre- 
pare a  schedule  showing  the  hourly  loss  of  time ;  and 
that  the  removed  weight  be  placed  in  the  village 
museum,  with  appropriate  ceremonies,  as  a  valuable 
relic  of  the  forefathers.  This  judicious  compromise  met 
the  general  favor  of  the  house,  and  was  adopted  with- 
out division. 

Three  years  later  Mr.  Wilberforce  was  again  in 
Schnitzendorf,  and  found  that  the  controversy  concern- 


in^  the  clock  was  far  more  violent  than  before.  Indeed, 
it  had  become  the  one  great  subject  of  discussion.  In- 
stead of  losing  only  half  an  hour  a  day,  as  predicted  by 
Von  Schermerhorn  and  the  janitor,  the  clock  had  come 
to  lose  six  hours.  And  this  result  might  reasonably 
have  been  anticipated  if  the  council  had  carefully  con- 
sidered the  proposal  to  remove  the  weight,  for  neces- 
sarily the  reduction  of  the  weight  must  make  the  clock 
run  slower.  But  error  entrenched  in  law  can  be  de- 
feated only  by  long  seige,  and  Von  Schermerhorn  and 
his  party  stoutly  insisted  that  the  burden  of  proof  was 
on  anyone  who  proposed  a  change  to  show  that  his  pro- 
posal would  remedy  all  difficulties,  and  as,  in  the  absence 
of  a  clockmaker,  the  question  had  to  be  discussed  from 
theoretical  standpoints,  a  majority  could  never  be 
obtained  for  any  one  change.  The  party  favoring  a 
wheel  of  the  proper  size  had  grown  quite  strong,  and 
yet  many  of  them  were  ready  to  accept  a  wheel  with 
the  proper  number  of  cogs,  without  regard  to  size,  as  a 
compromise  measure.  The  essential  thing  to  them  was 
to  have  a  wheel.  Another  strong  faction  held  that  the 
clock  was  of  no  real  importance,  as  the  clerk's  schedule 
was  the  real  source  of  information  as  to  time,  and  they 
favored  abandoning  the  clock  altogether,  and  issuing 
time  schedules  for  the  use  of  the  people.  There  was 
also  a  large  party  that  favored  taking  oft"  more  weights 
until  the  clock  should  lose  twelve  hours  a  day.  This, 
they  easily  showed,  would  make  a  day  of  twelve  hours, 
which  would  be  a  vast  improvement  because  everybody 
could  do  twice  as  much  in  an  hour  as  formerly.  It 
would  of  course  be  a  tax  on  employes  who  were  under 
a  contract  to  work  ten  hours  a  day,  but  workingmen 
had  a  tendency  toward  anarchism,  and  were  unreason- 


8 

able  in  their  opposition  to  an  honest  hour.  This  plan 
was  advocated  by  all  employers,  who  opposed  with  vir- 
tuous indignation  the  dishonest  day  of  twenty-four  hours, 
and  so  the  system  of  removing  weights  had  strong  sup- 
port, although  it  was  producing  an  effect  quite  opposite 
to  what  had  originally  been  claimed  for  it. 

At  length  Von  Schermerhorn  brought  forward  a 
new  plan  for  a  compromise.  He  proposed  that  the 
clerk  should  be  directed  to  inscribe  on  a  piece  of  paper, 
"  This  is  ten  pounds,  by  order  of  the  Council  of  Schnit- 
zendorf,"  which  declaration  should  be  signed  by  the 
Mayor  and  countersigned  by  the  clerk,  and  the  paper 
should  then  be  suspended  in  the  place  of  the  weight 
which  had  been  removed.  He  said  he  had  become  satis- 
fied that  they  had  gone  too  far  in  removing  the  weight, 
but  that  it  could  not  be  restored  because  the  janitor  had 
unfortunately  sold  it  for  old  iron.  He  was  willing  how- 
ever to  give  the  weight  theory  a  fair  trial,  and  thought 
that  the  council  should  yield  to  the  general  demand 
that  something  be  done.  After  some  discussion  an 
amendment  was  adopted  making  the  inscription  read 
"twenty  pounds"  instead  often,  and  the  ordinance 
was  passed,  amid  loud  applause  from  the  galleries. 

During  the  few  days  that  Mr.  Wilberforce  remained 
in  the  village  the  clock  continued  to  lose  time  as  before, 
but  there  was  a  general  faith  that  it  would  do  better 
when  it  became  accustomed  to  the  paper.  The  reader 
will  doubtless  agree  with  the  learned  traveler  in  regret 
that  no  information  as  to  the  final  outcome  of  the  clock 
question  has  been  received.  Those  who  are  interested 
in  such  matters  should  procure  his  works  and  read  his 
very  thoughtful  remarks  on  the  difficulty  of  regulating 
clocks  on  a  compromise  basis. 


II. 

Why  The  Coinage  Clock  Went  Wrong. 


^ 


From  time  immemorial  governments  have  fixed 
their  own  forms  of  money,  giving  to  coins  such  weight, 
fineness,  and  relative  value  as  they  saw  fit,  and  this  was 
necessary  because  every  nation  needed  a  fixed  form  of 
money  for  its  domestic  uses,  which  are  always  greater 
than  the  international  uses,  and  no  nation  could  expect 
to  have  its  coinage  furnished  by  other  nations.  But 
this  necessity  gave  rise  to  disadvantages.  Money  is  the 
medium  of  international  commerce  aswd^ll  as  of  domes- 
tic commerce,/and  when  the  merchant  or  the  traveler 
passed  beyWd  the  bounds  of  his  own  country  he  was 
obliged  to  use  forms  of  money  difiering  in  size,  name, 
quality  and  value  from  those  of  his  home.  In  olden 
times  this  was  not  so  serious  a  trouble,  because  com- 
merce was  limited,  but  it  grew  as  civilization  grew,  and 
during  the  present  century  it  has  increased  enormously, 
for  this  has  been  peculiarly  a  century  of  development 
of  international  commerce.  The  application  of  steam 
power  to  transportation  on  both  land  and  sea  has  given 
opportunity  for  the  exchange  of  surplus  products  that 
did  not  exist  before,  and  the  telegraph  has  practically 
annihilated  distance,  so  far  as  communication  is  con- 
cerned. New  York  can  communicate  with  New  Zea- 
land, or  Japan,  or  India,  or  the  Cape  of  Good  Hope,  or 
Rio  Janeiro,  more  quickly  now  than  it  could  with 
Washington  in  1820.  With  fourteen  cables  crossing 
the  Atlantic,  with  cables  circling  Africa,  Asia  and  South 
America,  and  extending  to    Australia  and   the    more 


10 

important  islands,  with  wires  ramifying  every  civilized 
country,  and  crossing  some  uncivilized  ones,  the  world 
is  in  closer  communication  now  than  the  towns  of 
Rhode  Island  were  at  the  beginning  of  the  century. 

As  for  international  commerce,  its  spread,  even  in 
old  and  mercantile  countries,  is  almost  beyond  belief. 
In  1800  the  total  annual  international  commerce  of  the 
world  was  estimated  at  $1,510,000,000.  In  1889  the 
foreign  commerce  of  the  United  States  alone  was 
$1,600,000,000,  while  the  international  commerce  of  the 
world  was  estimated  at  $16,885,000,000.  The  decade  of 
the  most  rapid  increase  of  international  commerce  was 
1850  to  1860,  when  steam  was  being  most  rapidly 
applied  to  transportation,  and  the  period  from  1840  to 
the  present  is  marked  throughout  by  this  development. 
In  1840  the  world's  international  commerce  had  reached 
only  $2,865,000,000,  a  gain  of  but  ninety  per  cent,  over 
1800.  In  1840  there  were  but  4,515  miles  of  railroad  in 
the  world — less  than  now  in  the  State  of  Indiana — but 
in  1880  there  were  228,440  miles.  In  1840  the  total 
horse  power  of  the  steamships  of  the  world  was  330,000; 
in  1880  it  was  5,240,000.  In  1840  the  carrying  power 
of  all  the  shipping  in  the  world  was  10,482,000  tons;  in 
1882  it  was  37,900,000  tons.*  With  this  increase  of  \ 
commerce  and  cheapening  of  transportation,  the  annoy-  ) 
ances  and  disadvantages  of  differing  currencies  were 
multiplied  over  and  over. 

The  most  important  source  of  this  trouble  was  the    . 

difference  of  standards  of  value,  and  this,  too,  although       \ 

nearly  all  countries  used  the  same  materials,  gold  and 

silver,  for  their  standards.     The  difference  in  size  of 

coins,  and  the  amount  of  alloy  they  contained,  could 
/ 

\ 


Note. — These  figures  are  Mulhall's. 


11 

be  overcome  with  comparative  ease,  because  they  could 
be  measured  by  the  amount  of  pure  gold  or  silver  they 
contained,  but  for  various  reasons  diflerent  countries 
fixed  diflerent  relations  between  gold  and  silver,  so  that 
the  same  quantity  of  one  metal  was  worth  more  in  one 
country  than  in  another.  This  should  be  clearly  under- 
stood and  firmly  borne  in  mind,  because  it  was  the 
greatest  evil  of  the  coinage  systems  of  the  world,  and 
the  one  that  was  most  aggravated  by  the  closer  con- 
nection of  the  nations  in  commerce.  One  country 
decreed  that  an  ounce  of  gold  should  equal  15  ounces 
of  silver,  another  that  it  should  equal  15|  ounces,  and 
another  that  it  should  equal  16  ounces,  while  in  some  of 
the  countries  that  we  call  uncivilized  an  ounce  of  gold 
was  valued  at  only  10  or  12  ounces  of  silver,  j^ow  in 
each  country  the  decree  of  that  country  was  binding  to 
a  certain  extent,  because  in  the  payment  of  debts  the 
creditor  was  obliged  to  take  any  kind  of  lawful  money 
that  was  tendered  to  him,  but  beyond  the  borders  of 
the  country  its  authority  ceased,  and  gave  place  to 
another  authority.  Therefore  the  merchant  or  the 
banker  would  send  gold  to  the  country  where  the  most 
silver  could  be  obtained  for  it,  and  send  silver  to  the 
country  where  the  most  gold  could  be  obtained  for  it, 
and  so  the  coins  of  the  various  nations  were  drawn 
about  over  the  world  as  profit  could  be  made  from  their 
removal. 

This  fact  has  been  observed  for  many  years,  and  it 
has  caused  an  immense  amount  of  trouble  to  various 
countries  at  various  times.  The  principle  is  commonly 
called  "  Gresham's  law,"  and  it  is  usually  stated  in  the 
form,  "  Bad  money  drives  out  good  money."  This 
expression   is  accurate  enough  in  some  cases,  as,  for 


12 

example  clipped  coin,  if  tolerated,  will  drive  out  un- 
dipped coin,  or  paper  money  that  is  not  maintained  on 
a  specie  basis  will  drive  out  specie.  But  it  leads  to 
confusion  if  used  in  regard  to  the  movement  of  coin 
metals.  For  example,  if  England's  coinage  ratio  of 
gold  to  silver  were  1  to  15,  and  the  ratio  of  France 
were  1  to  16,  and  both  had  free  coinage  of  both  metals, 
the  merchants  and  bankers  would  take  an  ounce  of  gold 
from  England  and  exchange  it  for  1(5  ounces  of  silver 
in  France,  and,  returning  to  England,  would  buy  another 
ounce  of  gold  with  15  ounces  of  their  silver,  but  it 
would  be  absurd  to  say  that  silver  was  bad  money  in 
England  and  good  money  in  France,  or  that  gold  was 
good  money  in  England  and  bad  money  in  France. 
Nevertheless  gold  would  be  taken  out  of  England,  and 
silver  would  be  taken  out  of  France.  The  more  proper 
statement  would  be  that  gold  and  silver  move  to  the 
country  which  gives  them  the  greatest  money  value. 
And  this  form  of  statement  is  the  more  desirable  because 
it  makes  easier  an  understanding  of  the  expression 
"  market  value  "  as  applied  to  gold  and  silver,  for  from 
this  traflac  in  these  metals  it  resulted  that  their  com- 
mercial value  was  higher  than  the  coinage  value  placed 
on  them  by  the  countries  least  favorable  to  them,  and 
lower  than  the  coinage  value  placed  on  them  by  the 
countries  most  favorable  to  them,  for  the  cost  and 
danger  of  transportation  had  always  to  be  considered 
as  well  as  the  matter  of  profit  to  the  owner.  Within 
these  limits  the  market  value  was  affected  to  some 
extent  by  speculation,  by  supply  and  demand,  by  new 
discoveries,  etc.,  but  the  chief  influence  was  the  force 
of  the  combined  legislation  of  the  world,  for  legislation 
fixed  the  ratios,  and  the  coinage  ratio  of  a  country  was 
its  bid  for  the  precious  metals  for  coinage  purposes. 


13 

Some  writers  make  the  mistake  of  attributing 
all  movements  of  gold  or  silver  from  one  country  to 
another  to  the  action  of  Gresham's  law.  As  a  matter 
of  fact  most  of  such  movements  are  due  simply  to  the 
fact  that  these  metals  are  money,  or,  in  the  bullion 
state,  that  they  are  designed  for  coinage.  The  chief 
cause  of  shipment  is  the  settlement  of  balances  of 
trade,  and  next  to  this  is  the  advanced  interest  rate 
which  one  country  gives  above  another.  It  is  commonly  \ 
known  that  when  the  Bank  of  England  wishes  to  draw  \ 
gold  to  that  country  the  directors  increase  the  discount 
rate,  putting  a  premium  on  money.  Other  things  being 
equal,  gold  is  shipped  in  response  to  such  a  call,  be- 
cause, being  less  bulky,  it  is  more  easily  and  cheaply 
transported.*  The  simplest  test  of  the  question  whether 
a  certain  movement  of  gold  or  silver  is  due  to  Gresham's 
law  is  a  comparison  of  the  money  system  of  the  country 
to  which  it  moves  with  that  of  the  country  from  which 
it  moves,  for  of  necessity  no  such  movement  can  be  due 
to  an  inherent  quality  of  the  money  if  the  two  countries 
have  similar  money  systems.  There  can  be  no  profit  in 
traffic  in  money  metals  between  two  countries  whose 
money  systems  are  the  same,  but  there  may  be  at  any 
time  a  movement  of  money  for  ordinary  money  uses. 
For  example,  the  money  systems  of  Great  Britain, 
France,  and  the  United  States  are  now  the  same  so  far 
as  the  quality  of  the  money  is  concerned.  They  are  all 
on  a  gold  basis,  and  all  float  silver  and  paper  money  on 
a  parity  with  gold  by  maintaining  gold  redemption  of 
both.  They  have  different  coinage  ratios,  but  the 
market  value  of  silver  is  so  far  below  its  coinage  value 
in   either  of  the  three,  that  the  difference  of  coinage 


Note — See  Statement  of  Alfred  de  Rothschild  in    Proceedings  of   Brussels  In- 
ternational Monetary  Conference,  p.  66. 


14 

ratios  cannot  possibly  afi'ect  the  market  value  of  either 
metal.  Hence  it  is  certain  that  neither  the  flow  of  gold 
to  England  from  the  United  States  in  the  early  summer 
of  1893,  nor  the  return  flow  to  this  country  a  few  weeks 
later,  was  due  to  Gresham's  law.  The  outward  flow 
was  due  to  the  payment  of  balances  of  trade  and  the 
premium  on  money  in  Europe.  When  our  eastern  banks 
suspended  money  payments,  and  issued  clearing  house 
certificates,  money  went  to  a  higher  premium  here  than 
in  Europe,  and  gold  returned,  not  because  it  was  gold 
;  but  because  it  was  money.  All  money,  gold,  silver,  and 
I  paper,  was  at  a  premium.  Therefore,  whatever  might 
have  been  the  eflect  of  the  Sherman  law  on  our  credit, 
it  is  beyond  question  that  these  movements  of  gold  are 


\ 


\    not  to  be  explained  by  Gresham's  law. 

But,  to  return  to  commerce,  I  have  said  that  the 
effects  of  this  difference  of  coinage  ratios  was  enor- 
mously increased  by  the  development  ot  international 
commerce.  Perhaps  this  may  be  more  clearly  seen  by 
looking  at  historical  facts.  Lord  Liverpool  declared 
that,  "  The  evils  resulting  from  the  fluctuations  in  the 
relative  prices  of  these  metals  do  not  appear  to  have 
shown  themselves  in  any  great  extent,  or  at  least  to 
have  been  the  subject  of  general  complaint,  till  the 
reign  of  James  I."*  This  is  probably  true,  though  as 
early  as  1553  Sir  Thomas  Gresham  was  complaining 
that  the  new  commerce  of  England  had  increased  the 
exchange  value  of  "  thirty-two  shillings  Flemish  "  from 
twenty  shillings  sterling  to  twenty-six  shillings  eight 
pence,  and  stoutly  asserting  that  "  plenty  of  merchants 
without  experience  is  the  uttermostly  destruction  of 
any  realm. "f    The  spread  of  English  foreign  commerce 

'■'Note. — Coins  of  the  Realm,  p.  117. 

•j-NoTK. — Froude's  England,  Vol.  5,  p.  131,  note. 


15 

under  Elizabeth  was  great,*  and  by  it  the  commerce  in 

gold  and  silver  as  commodities,  with  countries  having 

other  coinage  ratios,  grew  and  produced  its  necessary 

effects  on  England's   coin.     The  laws  were  repeatedly 

changed,  but  first  one  metal  was  exported  and  then  the 

other,  as  the  ratio  made  profitable.     The  efl:ect  on  this 

trafiic  of  the   limited   transportation    facilities  of   the 

period  may  be  seen  from  the  following  extract  from  the 

report  of  Sir  Isaac  Newton,  director  of    the    English 

mint,  in  1717.     After  explaining  that  in  England  the 

bullion  value  of  silver  is  greater  than  its  coin  value,  the 

English  ratio  being  1  to  15.86 — and  that  "  When  ships 

are  lading  for  the  East  Indies,  the  demand  for  silver 

for  exportation  raises  the  price  "  by  1|  to  3|  pence  per 

ounce,  he  says  : 

Gold  is  in  Spain  and  Portugal  of  sixteen  times 
more  value  than  silver  of  equal  weight  and  alloy,  accord- 
ing to  the  standard  of  those  kingdoms  ;  at  which  rate  a 
guinea  is  worth  22s.  Id. ;  but  this  high  price  keeps 
their  gold  at  home  in  good  plenty,  and  carries  away  the 
Spanish  silver  into  all  Europe,  so  that  at  home  they 
make  their  payments  in  gold,  and  will  not  pay  in  silver 
without  a  premium ;  upon  the  coming  in  of  a  plate 
{silver) fleet  the  premium  ceases,  or  is  but  small;  but  as 
their  silver  goes  away,  and  becomes  scarce,  the  premium 
increases,  and  is  most  commonly  about  six  per  cent., 
which  being  abated,  a  guinea  becomes  worth  about  20s. 
9d.  in  Spain  and  Portugal.  *  *  *  In  China  and 
Japan,  one  pound  weight  of  fine  gold  is  worth  but  nine 
or  ten  pounds  of  fine  silver ;  and  in  East  India  it  may 
be  worth  twelve ;  and  the  low  price  of  gold  in  propor- 
tion to  silver  carries  away  the  silver  from  all  Europe. 
So  then,  by  the  course  of  trade  and  exchange  between 
nation  and  nation  in  all  Europe,  fine  gold  is  to  fine 
silver  as  14  4-5  or  15  to  1  ;  and  a  guinea  at  the  same 
rate,  is  worth  between  208.  5d.  and  20s.  8Jd.,  except 
in  extraordinary  cases,  as  when  a  plate  fleet  is  just  ar- 
rived in  Spain,  or  ships  are  lading  here  for  the  East  Indies, 

Note. — Hume's  England,  Vol.  4,  p.  205,  et  seq. 


16 

which  cases  I  do  not  here  consider.  And  it  appears  by 
experience,  as  well  as  by  reason,  that  silver  flows  from 
those  places  where  its  value  is  lowest  in  proportion  to 
gold,  as  from  Spain  to  all  Europe,  and  from  all  Europe 
to  the  East  Indies,  China,  and  Japan;  and  that  gold  is 
most  plentiful  in  those  places  in  which  its  value  is  high- 
est in  proportion  to  silver,  as  in  Spain  and  England.* 

The  fact  that  the  coinage  of  a  nation  was  thrown  out 
of  equipoise  by  the  arrival  or  departure  of  a  few  ships 
was  due  to  the  slowness,  irregularity  and  cost  of  trans- 
portation. The  effects  which  Newton  notes  were  seen 
not  only  in  England  and  Spain  but  also  in  the  American 
colonies  and  elsewhere. f  As  the  volume  of  shipping 
increased,  the  effect  of  commerce  on  the  transportation 
of  metals  grew  so  continuous  and  steady  that  it  did  not 
cause  sudden  changes,  and  therefore  did  not  attract  the 
same  attention,  but  the  effect  was  increasing — not  de- 
creasing. In  this  country  the  connection  between  the 
movement  of  the  money  metals  and  the  movement  of 
ships  attracted  comment  even  so  late  as  1833,  when 
Samuel  Moore,  Director  of  the  Mint,  reported  to  Con- 
gress, "The  fact,  indeed,  is  familiar  at  the  mint,  that 
gold  coins  often  remain  in  the  vaults,  unclaimed  by  the 
depositors,  until  the  day  of  the  departure  of  one  of  the 
packets  for  Liverpool.";]:  Indeed  the  stability  of  our 
coinage  under  the  act  of  1792  was  largely  due  to 
the  cost  of  and  lack  of  facilities  for  transportation, 
for  although  we  undervalued  gold  by  establishing  a 
ratio  of  1  to  15,  there  was  no  premium  on  gold  in 
this  country  that  attracted  notice  until  1821,§  and  yet  in 
the  course  of  the  next  twelve  years  it  became  an  intoler- 
able nuisance,  and  Congress  changed  the  ratio,  by  the 


*NoTE.— Proceedings  Paris  International  Monetary  Conference,  1878,  p.  317. 
fNoTE.— See  collected  instances  in  Del  Mar's  History  of  Money. 
JNoTE.— House  Doc.  No.  38,  ad  Sess.  aad  Cong.,  p.  4. 
gNoTE.—        "  "  "  "  "  pp.  a.  10. 


17 

act  of  1884,  to  1  to  15.98.  This  ratio  was  equally  a 
mistake  because  it  undervalued  silver,  and  yet  our  con- 
ditions of  commerce  were  such  that  it  served  the  country 
very  well  for  more  than  fifteen  years.  It  is  often  stated 
that  the  new  ratio  at  once  drove  silver  out  of  the 
country.  This  is  not  correct.  I  know  of  no  better 
witness  on  this  subject  than  Hugh  McCulloch,  ex-Secre- 
tary of  the  Treasury,  who  was  engaged  in  banking 
from  1835  to  the  beginning  of  the  civil  war.  Speaking 
ot  his  connection  with  the  State  Bank  of  Indiana,  he 
says  : 

Although  the  double  standard  existed  in  the  United   \ 
States,  the  metallic  currency  of  the  country  chiefly,  and     \ 
throughout  the  West   exclusively,  from   the  time  the 
bank  was  organized,  in  1834,  to  the  discovery  of  gold 
in   California  in   1848,  was  silver.     The  capital  of  the 
bank  was  paid  up  in  Spanish  and   Mexican  dollars,  and 
its  reserve  continued  to  be  in  this  coin  until  it  was  sold 
for  gold   at  a  premium   of  about  three   per   cent,    on 
Mexican  dollars,  and  six  per  cent,  on  Spanish.     I  had 
been  a  banker  for  fourteen  years  before  I  handled  or    ; 
saw  a  dollar  in  gold  except  the  ten-thaler  pieces  which  y 
were  brought  into  this  country  by  German  immigrants.*/ 

Although  this  result  quickly  followed  the  gold  dis- 
coveries in  California,  it  was  not  due  to  them,  but  to  a 
change  in  our  commerce  produced  by  railroad  building, 
which  fairly  reached  the  eastern  part  of  the  upper  Mis- 
sissippi valley  at  this  time.  Before  that  our  export  was 
by  way  of  the  Mississippi  and  the  great  lakes,  chiefly 
the  former.  Our  import  was  chiefly  across  the  moun- 
tains by  wagon  or  canal,  and  then  by  the  Ohio  and 
wagon  to  destination.  We  sent  goods  down  the  Missis- 
sippi in  flat-boats,  abandoned  the  boats,  and  brought 
back  silver.  This  silver  was  passed  to  the  east  for 
goods.    It  was  the  Spanish  and  Mexican  coin  in  univer- 

NoTE. — Men  and  Measures  of  Half  a  Century,  p.  iig 


18 

sal  use  in  the  Gulf  country,  and  Spain  and  Spanish 
America  had  the  coinage  ratio  of  1  to  16,  as  we  did. 
Hence  the  silver  did  not  begin  to  leave  the  country 
noticeably  until  the  railroads  put  the  east  and  west  in 
direct  commercial  relations,  with  moderate  cost  for 
transportation  to  the  seaboard.  Then  it  went  swiftly. 
In  1853  the  drain  had  become  so  bad  that  Congress  de- 
based the  fractional  silver  coins,  and  made  them  "  token 
money,"  in  order  to  keep  any  change  in  the  country. 

Another  striking  instance  of  the  speedy  action  of 
Gresham's  law  in  connection  with  modern  commerce 
is  seen  in  the  case  of  Japan,  whose  experience  is  said 
by  Jevons  to  present  "the  most  extreme  instance  which 
has  ever  occurred."     He  says  : 

At  the  time  of  the  treaty  of  1858  between  Great 
Britain,  the  United  States,  and  Japan,  which  partially 
opened  up  the  last  country  to  European  traders,  a  very 
curious  system  of  currency  existed  in  Japan.  The  most 
valuable  Japanese  coin  was  the  kobang,  consisting  of  a 
thin  oval  disc  of  gold  about  2  inches  long,  and  1|  inches 
wide,  weighing  200  grains,  and  ornamented  in  a  very 
primitive  manner.  It  was  passing  current  in  the  towns 
in  Japan  for  four  silver  itzebus,  but  was  worth  in  Eng- 
lish money  about  18s.  5d.,  whereas  the  silver  itzebu 
was  equal  only  to  about  Is.  4d.  Thus  the  Japanese 
were  estimating  their  gold  money  at  only  about  one- 
third  of  its  value  as  estimated  according  to  the  relative 
values  of  the  metals  in  other  parts  of  the  world.  The 
earliest  European  traders  enjoj^ed  a  rare  opportunity  for 
making  profit.  By  buying  up  the  kobangs  at  the  native 
rating  they  trebled  their  money,  until  the  natives  per- 
ceiving what  was  being  done,  withdrew-  from  circula- 
tion the  remainder  of  the  gold. 

In  1860  the  Japanese  government,  having  observed 
the  effect  of  commerce  on  its  money,  changed  the  coin- 
age ratio  to  1  to  13|,  but  this  undervaluation  of  gold 
was  sufficient  to  carry  it  away  from  Japan,  as  we  shall 
see  hereafter.     To  sum  up  the  matter,  the  vast  growth 


19 

of  international  commerce  had  made  it  practically  im- 
possible to  maintain  bimetallism  so  long  as  various 
countries  had  diverse  coinage  ratios.  The  ancient 
system  that  had  served  very  well  through  preceding 
centuries  would  not  work  under  the  new  conditions. 
It  had  become  necessary  that  there  should  be  practical 
uniformity  in  the  coinage  systems  of  the  commercial 
world. 


III. 

The  Work  of  the  Council. 


The  movement  for  the  correction  of  the  evils  result- 
ing from  diverse  money  standards  in  different  nations 
originated  with  the  central  countries  of  Europe,  wliich 
suffered  greatly  from  those  evils  on  account  of  their 
clos^  commercial  relations.  It  is  frequently  stated  that 
France  maintained  bimetallism  at  the  ratio  of  1  to  15^ 
for  the  first  seventy  years  of  this  century  without  regard 
to  the  ratios  of  other  countries.  As  a  matter  of  I'act 
France  maintained  that  ratio,  just  as  the  United  States 
maintained  its  ratios  of  1  to  15  and  1  to  16,  that  is  to 
say,  its  coins  were  drawn  away  or  sent  back  according 
to  the  demands  made  by  the  ratios  of  other  countries. 
That  there  may  be  no  question  on  this  point,  I  quote  from 
the  report  of  the  French  committee  on  coinage  of  the 
Universal  Exposition  at  Paris  in  lb67,  made  by  L. 
Mathieu  and  Baron  de  Hock.  Speaking  of  the  disad- 
vantages of  bimetallism  under  existing  conditions,  they 
say: 


20 

These  are  not  idle  or  theoretical  fears.  The  exper- 
ience of  France,  and  in  all  the  countries  having 
the  double  standard  has  demonstrated  their  reality. 
Before  the  discovery  of  the  rich  mines  in  California,  in 
Australia,  in  the  northwest  of  the  United  States,  and 
in  the  British  North  American  possessions,  gold  having 
a  higher  market  price  than  the  legal  rate,  the  coins  of 
that  metal  disappeared  from  circulation,  and  could  only 
be  obtained  at  a  premium.  After  these  discoveries,  on 
the  contrary,  gold  having  depreciated  below  the  legal 
rate,  it  was  then  the  turn  of  silver  to  disappear.  All 
the  masses  of  silver,  which  the  Bank  of  France  had 
sought  to  accumulate  at  a  great  expense  to  obviate  that 
result,  were  soon  exhausted.  The  retail  business  sufiered 
very  much,  and  finally  no  other  remedy  was  found 
but  that  of  coining  gold  pieces  of  five  francs  (96  cents) 
and  silver  change  of  .835  fine.* 

While  these  gentlemen  state  a  fact  of  which  they 

had  personal  knowledge,  they  do  not  state  correctly  the 

causes  that  produced  this  result.     The  real  causes  are 

mentioned  in  the  report  of  this  conference  by  Mr.  Rug- 

gles,  our  commissioner,  though  he  appears  not  to  have 

caught  their  significance,  as  follows : 

The  interesting  fact  is  stated  in  a  historical  rei:)ort 
(recentl}'  published  by  a  member  of  the  British  Embassy) 
of  the  money  of  Japan,  that  it  possesses  a  coinage  of 
gold  and  silver  in  some  essential  features  resembling 
that  of  France,  particularly  in  a  double  standard,  under 
which  the  ratio  of  silver  to  gold  is  fixed  at  13|  to  1.  It 
appears  that,  in  ignorance  of  the  actual  relative  values 
of  the  two  metals  in  our  Atlantic  world,  (of  15  or  16  to 
1)  these  pagan  Asiatics  had  fixed  the  ratio  at  only  4  to 
1,  which  great  exaggeration  of  silver  they  were  further- 
more induced  to  continue  by  a  treaty  in  1858,  under 
which  they  were  rapidly  despoiled  of  their  gold  in  large 
quantities  by  some  of  the  traders  from  Christian  nations. 
The  partial  correction  of  the  mistake  in  1860,  by  rais- 
ing the  ratio  to  13|  to  1,  (if  any  ratio  fixed  by  gov- 
ernmental regulation  be  admissible  at  all,)  shows  an 
advance  of  intelligence  in  this  distant  region,  inspiring 
the  hope  that,  in  due  time,  at  least  a  portion  of  Eastern 

Note. — Report  of  International  Monetary  Conference  of  1867.     Ex.  Doc.  14,  2nd 
Sess.,  40th  Cong.,  p.  23. 


21 

Asia  may  be  brought  within  a  world-embracing  and 
world-protecting  belt  of  monetary  unification.  *  *  * 
The  course  of  the  monetary  currents  through  mid-r 
die  and  eastern  Asia  is  instructively  indicated  by  recent 
statistical  returns  from  Russia,  showing  that  of  the  gold 
and  silver  coin  sent  in  1865  from  Russia  overland  into 
China,  through  the  international  entrepot  of  Kiachta, 
3,876,184  roubles  were  in  silver,  and  only  327,979  roubles 
in  gold. 

It  was  the  high  valuation  of  silver  in  the  Orient, 
with  rapidly  increasing  commerce,.,that  caused  the  silver 
movement  of  1850-1860.  During  that  period  the  aver- 
age ratio  of  the  metals  at  Shanghai  was  1  to  14.34  as 
against  an  average  ratio  of  1  to  15.40  in  the  London 
market.*  That  means  an  average  difference  of  7  per 
cent,  to  cover  profit  and  transportation.  But  when 
Japan  was  suddenly  opened  to  the  commerce  of  Eng- 
land and  the  United  States,  the  market  value  of  silver 
at  once  advanced,  and  during  the  year  1859  and  the 
early  part  of  1860  maintained  the  highest  average  value 
that  had  been  known  for  years.  Japan's  temporary 
coinage  ratio  of  1  to  13|  afforded  an  exchange  profit  of 
nearly  15  per  cent,  over  the  ratio  of  France.  The 
brief-continuing  ratio  of  1  to  4  gave  an  exchange  profit 
of  289  per  cent.  These  advantages  of  commercial 
exchange  explain  the  rise  of  silver,  as  measured  in  gold, 
in  the  European  markets.  That  rise,  in  the  decade 
mentioned,  was  only  5  cents  an  ounce,  or  less  than  4  per 
cent.  The  great  gold  discoveries  of  that  period  did  not 
depreciate  gold  as  compared  with  silver.  The  general 
free  coinage  of  both  metals  at  fixed  ratios  prevented 
any  such  result.  The  real  effect  was  a  gradual  depre- 
ciation in  purchasing  power  of  all  money,  as  shown  in 
the  general  rise  of  prices. 

Note. — Report  of  Silver  Commission,  Vol.  i,  p.  570. 


22 

The  central  countries  of  Europe,  in  pursuance  of  a 
common  understanding,  first  endeavored  to  meet  the 
growing  evil  by  national  action.  Switzerland,  Italy  and 
France  debased  their  fractional  silver  coinage,  but 
Switzerland  reduced  it  to  .8  fine,  while  the  other  two 
made  their's  .835  fine.  In  consequence  the  Swiss  frac- 
tional coins  were  not  received  outside  of  Switzerland, 
and  on  account  of  this  inconvenience  a  formal  union,  in 
which  Belgium  also  was  included,  was  formed  in  1865. 
The  basis  of  this  union  was  bimetallic  free  coinage  at 
the  ratio  of  1  to  15|,  all  standard  coins  being  .9  fine, 
with  the  five-franc  piece  (96J  cents)  as  the  unit.  No 
gold  coins  smaller  than  the  five-franc  piece  were  to  be 
coined,  and  all  smaller  silver  coins  were  only  .835 
fine.  These  debased  fractional  coins  were  legal  tender 
throughout  the  union  to  the  amount  of  50  francs,  and 
the  nation  issuing  them  was  bound  to  accept  them  to 
any  amount.  The  coinage  of  the  four  countries  was 
made  uniform  in  denomination,  size,  weight  and  form. 
For  coins  above  five  francs,  each  nation  was  permitted 
to  issue  gold  coins  of  10,  20,  50  and  100  francs,  but 
could  not  coin  other  values. 

This  system  worked  so  satisfactorily  that  in  18G7 
an  invitation  was  sent  to  all  the  nations  to  join  in  an 
international  monetar}'^  conference  to  be  held  in  connec- 
tion with  the  exposition  at  Paris  in  that  year.  Nineteen 
nations  sent  representatives,  and  there  seemed  a  fair 
prospect  of  accomplishing  something.  They  all  agreed 
that  the  diversity  of  coinage  was  injurious  to  com- 
merce and  governments.  They  all  agreed  that  there 
ought  to  be  a  system  of  international  uniformity.  ,  But 
when  it  came  to  the  details  of  that  system  there  was  a 
remarkable  diversity  of  opinion  as  to  matters  that  seem 


•23 

to  be  of  little  importance.  Most  of  the  delegates  were 
profoundly  impressed  with  the  advantages  of  the  French 
metrical  system  of  weights  and  measures,  and  thought 
it  should  be  applied  to  coinage.  There  was  an  immense 
amount  of  talk  about  grams,  and  millimetres,  and 
scientific  standards,  which  was  of  little  use,  because 
Measures  of  value  are  not  only  purely  artificial, 
but  they  are  also  intrinsically  diflerent  from  any 
other  measures  in  that  they  can  never  be  permanently^, 
and  definitely  fixed.  You  might  fix  a  relation  between 
the  weight  or  the  diameter  of  a  gold  coin  and  the  length 
of  the  earth's  meridian  quadrant,  if  the  length  of  that 
quadrant  could  be  exactly  ascertained,  but  you  could 
never  fix  any  relation  between  the  value  of  the  coin 
and  the  length  of  that  quadrant.  Our  commissioner, 
Mr.  Ruggles,  contended  earnestly  for  a  25-franc  coin 
($4.82|),  as  that  would  be  a  reasonable  approximation 
to  both  our  five-dollar  piece  and  the  English  pound 
sterling,  which  coins  were  as  small  as  these  two  nations 
desired  to  issue  in  gold,  but  the  Europeans  objected  to 
this  departure  from  the  decimal  system  in  force  in  the 
Latin  Union,  and  our  Commissioner  came  home  in  a 
state  of  exasperation  on  that  account.  The  most  extra- 
ordinary thing  about  this,  conference,  however,  was  the 
unanimity  with  which  they  decided  against  a  bimetal- 
lic standard,  which  was  the  chief  distinction  of  the 
Latin  Union,  whose  success  had  led  to  this  conference. 
Almost  without  discussion,  they  agreed  to  the  proposi- 
tion that  international  money  "  is  attainable  on  the  basis 
and  condition  of  adopting  the  exclusive  gold  standard, 
leaving  each  state  the  liberty  of  keeping  its  silver 
standard  temporarily."  This  proposition  received  the 
support  of  every  nation  but  Holland.     Silver  standard 


24 

Russia,  Austria  and  Prussia,  gold  standard  England 
and  Portugal,  bimetallic  standard  France,  Italy,  Swit- 
zerland and  United  States,  all  voted  for  it.  The  only 
man  in  the  conference  who  seemed  to  have  considered 
the  probable  ettect  of  destroying  silver  as  a  standard 
money,  was  Mr.  Mees,  the  shrewd  old  president  of  the 
Bank  of  the  Netherlands,  who  stubbornly  insisted  that, 
"He  considered  it  inconvenient  to  adopt  the  gold  stand- 
ard everywhere,  because  it  would  reduce  silver  to  change- 
money,  and  consequently  gold  would  rise  in  value." 

Very  little  came  of  this  conference  in  the  line  of 
its  original  purpose.  Spain,  Finland,  Hayti,  Argentine 
Republic,  and  Venezuela  have  adopted  the  franc  value 
(19.3  cents)  as  the  unit  of  their  coinage,  and  several 
countries,  including  nearly  all  of  Central  and  South 
America,  have  issued  coins  in  multiples  of  the  franc 
value,  but  that  is  all.  It  was  an  error — an  act  of  supreme 
folly — that  the  United  States  did  not  reduce  the  dollar 
to  the  tive  franc  value  (96.5  cents),  and  adopt  a  coinage 
ratio  of  1  to  15J  in  1873,  when  we  were  using  paper 
money,  and  when  nothing  but  coin  contracts  would 
have  been  aftected.  But  unfortunately  our  "financiers" 
were  more  interested  in  demonetizing  silver  than  in 
forwarding  the  cause  of  international  money.  Indeed 
the  same  sentiment  seemed  to  prevail  everywhere,  for 
the  adoption  of  the  gold  standard  became  the  common 
course,  as  will  be  seen  from  the  following  chronological 
statement  of  monetary  legislation,  and  some  events 
connected  with,  or  altecting  financial  affairs: 

1870.  Franco-German  war. 

1871.  Germany  adopts  law  for  gold  standard,  and 
stops  coining  silver. 

1872.  Denmark,  Sweden  and   Norway  decide  for 


25 

gold  standard.     Germany  retires  silver  coin.     Payment 
of  French  war  indemnity. 

1873.  United  States  adopts  gold  standard.  Begin- 
ning of  panic  and  trade  depression  that  lasts  until  1880. 
Germany  begins  silver  sales.     Panic  in  Germany. 

1874.  Holland  stops  coining  silver.  Latin  Union 
restricts  coinage  of  silver  to  $28,000,000  per  annum. 

1875.  Holland  demonetizes  silver.  Denmark,  Swe- 
den and  Norway  demonetize  silver.  United  States 
adopts  law  for  resun^ption  of  specie  payments  on  Janu- 
ary 1,1879. 

1876.  Latin  Union  limits  total  silver  coinage  to 
$120,000,000.  United  States  takes  legal  tender  quality 
from  trade  dollar. 

1877.  Latin  Union  stops  silver  coinage  and  goes 
to  gold  basis.     Russo-Turkish  war. 

1878.  United  States  begins  silver  purchases.  Japan 
abandons  gold  standard,  and  makes  unit  of  value  the 
silver  dollar  of  420  grains.  Great  trade  depression  in 
England.  Failure  of  Glasgow  City  and  West  of  Eng- 
land banks. 

1879.  United  States  resumes  specie  payments  on 
gold  basis.     Germany  stops  silver  sales. 

1881.  Argentine  Republic  attempts  bimetallism 
at  ratio  of  1  to  15.3.  French  panic.  Collapse  of  the 
Union  Generale. 

1884.  Trade  depression  and  labor  crisis  in  France. 
Panic  in  United  States. 

1885.  Egypt  demonetizes  silver.  Panic  in  Argen- 
tine Republic — specie  payments  suspended. 

1887.  Turkey  demonetizes  silver,  and  prohibits  its 
importation. 

1888.  Panama  Canal  collapse.    Panic  in  France. 


26 

1890.  Roumania  demonetizes  silver.  United  States 
begins  purchase  of  54,000,000  ounces  of  silver  per 
annum.     Panic  in  United  States. 

1891.  Argentine  collapse.     Panic  in  England. 
1898.     Austria-Hungary  resumes  specie  payments 

on  gold  basis.  India  attempts  gold  standard.  Bank- 
ruptcy of  Australia.  Great  panic  in  United  States. 
Financial  troubles  in  Italy,  Greece  and  other  European 
countries. 

During  these  same  years  there  occurred  the  most 
remarkable  movement  in  gold  prices  that  has  ever  been 
known,  and  which  is  shown  in  the  accompanying  table. 
The  figures  speak  for  themselves,  but  a  word  of  expla- 
nation may  be  appropriate  as  to  the  "  index  numbers." 
These  show  the  movement  of  average  prices  with  refer- 
ence to  a  fixed  standard  which  is  called  100.  Dr.  Soet- 
beer  takes  as  a  standard  the  average  prices  of  1847-50, 
and  his  figures  show  the  average  movement  of  price  of 
100  articles  on  the  Hamburg  market  and  14  articles  of 
British  export.  I  use  also  the  continuation  of  Dr. 
Soetbeer's  figures  from  similar  material  as  published  by 
Prof.  Taussig  in  "  The  Silver  Situation  in  the  United 
States."  Mr.  Augustus  Sauerbeck  takes  as  a  standard 
the  average  prices  from  1853  to  1877  inclusive,  a  period 
of  twenty-five  years,  and  his  figures  show  the  movement 
of  price  of  forty-five  articles  in  the  London  market. 
The  London  Economist  figures  show  the  movement  of 
price  of  twenty-two  leading  articles  in  the  London 
market.  They  were  prepared  by  Mr.  Newmarch,  who 
takes  for  his  standard  the  average  prices  of  1845-50 
which  were  used  by  Jevons.  These  are  usually  given 
on  a  basis  of  2,200,  i.  e.,  100  for  each  article,  but  I  give 
them  as  reduced  to   the  basis  of  100  for  all,  which  is 


27 


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28 

obtained  by  dividing  the  aggregate  averages  by  twenty- 
two.  The  figures  of  the  Senate  Finance  Committee 
show  the  average  movement  of  wholesale  prices  in  the 
United  States,  and  were  prepared  by  the  statistical 
experts  in  the  government  employ  for  the  report  of  the 
committee  to  Congress.*  It  has  been  objected  to  the 
index  numbers  of  Dr.  Soetbeer  and  the  London  Econo- 
mist,  by  Hans  Forssell,  ex-Minister  of  Finance  of 
Sweden,  and  other  monometallists,  that  they  were 
unfair  because  they  did  not  consider  the  commercial 
importance  of  the  articles  taken,  and  because  a  stand- 
ard taken  in  the  years  1845-50  was  abnormally  low. 
Mr.  Nash  therefore  prepared  tables,  taking  as  a  stand- 
ard the  average  prices  of  1865-69,  and  also  rating  each 
article  in  proportion  to  the  total    consumption. 

Table  2. 


Years. 

Economist  numbers, 

without  reference  to 

importance  of  articles. 

Economist  numbers, 

with  reference  to 

importance. 

French  numbers, 

with  reference  to 

importance. 

1869-70 

100 

- 

100 

100 

1870 

91 

- 

90 

91 

1871 

90 

- 

93 

102 

1872 

97 

- 

100 

105 

1873 

102 

- 

104 

106 

1874 

100 

- 

108 

97 

1875 

96 

- 

97 

95 

187G 

93 

- 

99 

95 

1877 

94 

- 

100 

96 

1878 

87 

- 

96 

91 

1879 

76 

- 

82 

87 

1880 

87 

- 

89 

88 

1881 

81 

- 

93 

86 

1882 

83 

- 

87 

84 

1883 

80 

- 

- 

88 

80 

1884 

75 

- 

- 

80 

1886 

- 

70 

- 

- 

76 

Note. — Report  No.  1394,21!  Sess.  S2ti  Cong. 


29 

The  foregoing  table  shows  the  result,  and  also  the 
result  as  to  twenty-two  articles  in  the  French  market, 
computed  on  the  same  basis.* 

A  comparison  of  these  figures  shows  the  same 
result  as  the  original  index  numbers — a  heavy  and 
almost  continuous  decline  of  prices.  The  monometal- 
list  objectors  might  have  anticipated  this  if  they  had 
stopped  to  think.  The  standard,  in  a  question  of  rela- 
tive movement,  is  immaterial,  so  long  as  it  is  fixed.  If 
we  should  take  the  prices  of  1773,  or  of  1492,  as  the 
standard,  the  relative  movement  would  be  the  same.  If 
we  should  take  the  prices  of  1872  or  1873  as  the  stand- 
ard, and  call  it  100,  and  reduce  the  others  to  the  same 
basis,  it  would  have  no  more  effect  than  reducing  a 
fraction  to  its  lowest  terms.  The  matter  of  use  or  con- 
sumption would  be  a  factor  of  importance  if  we  were 
considering  the  expense  of  living,  but  it  is  of  very  little 
importance  considering  the  broader  question  of  the 
appreciation  of  gold.  However,  that  is  immaterial  for 
present  purposes,  for  as  we  have  seen  the  results  are 
practically  the  '^ame  no  matter  how  or  when  obtained. 
The  student  of  social  economy  must  accept  them  as 
'  facts,  or  deny  all  existing  records  of  a  statistical  char- 
acter. We  may  therefore  proceed  with  the  considera- 
tion of  the  money  question,  in  the  light  of  these  facts, 
without  any  apprehension  that  they  can  be  successfully 
questioned. 

What  did  Mr.  Mees  mean  by  saying  that  the  gen- 
eral adoption  of  the  gold  standard  "  would  reduce  silver 
to  change-money,  and  consequently  gold  would  rise  in 
value  ?  "  The  word  here  translated  "  change-money  " 
is  the  French  billo7i,  which  does  not  mean  small  coins, 

Note.— A  full  explanation  of  this  subject  will  be  found  by  those  who  desire  it  in 
the  report  of  Mr.  Edward  Atkinson  on  "Bimetallism  in  Europe."  Sen.  Doc.  34,  ist 
Sess.  50th  Cong. 


30 

but  debased  coins  or  token  money,  such  as  is  commonly 
made  for  small  change.  Such  coin  does  not  circulate 
on  its  intrinsic  value  but  on  credit.    It  is  redeemable  in 

I 

something  else  by  the  nation  that  issues  it,  and  that 
something  is  standard  money,  or  money  of  ultimate 
payment.  The  use  of  silver  as  token  money  was  no 
new  thing  to  Mr.  Mees'  hearers.  England  and  Portugal 
had  reduced  all  their  silver  money  to  that  condition. 
The  Latin  Union  had  made  all  coins  below  the  five- 
franc  piece  token  money.  The  United  States,  in  1853, 
had  debased  all  its  coins  smaller  than  the  dollar ;  and 
every  country  represented  in  the  congress  had  more  or 
less  money  of  the  same  kind.  Of  course,  if  gold  were 
made  the  sole  standard  all  silver  would  be  reduced  to 
token  money.  It  would  stand  for  so  much  gold.  But 
why  should  that  increase  the  value  of  gold  ?  The  issues 
of  billo7i  had  not  affected  it. 

The  reason  is  simple.  More  than  nine-tenths  of  all 
the  business  of  the  world  is  done  on  credit — by  checks, 
notes,  bonds,  open  accounts,  bills  of  exchange,  etc. — 
and  this  credit  creates  a  nearly  constant  body  of  debt. 
Some  one  is  always  getting  out  of  debt,  but  others  are 
always  getting  into  debt,  so  that  ordinarily  the  volume 
of  debt  is  growing  as  the  commerce  of  the  world  in- 
creases. Occasionally  we  have  a  period  of  liquidation, 
or  hard  times  as  it  is  commonly  called,  and  then  the 
volume  of  debt  shrinks  some,  but  commerce  shrinks 
much  more,  and  after  such  a  period  debt  grows  more 
rapidly.  On  what  does  this  volume  of  debt  rest  ?  The 
laws  of  every  country  give  the  creditor  the  right  to  de- 
mand payment  in  money.  Lands,  stocks,  and  property 
of  all  kinds  are  used  as  security  for  debt,  but  when  the 
creditor  enforces  payment  in  the  courts,  this  property 


31 

is  sold  and  the  money  received  is  applied  to  the  pay- 
ment of  the  debt.  No  matter  how  much  property  the 
debtor  may  have,  he  cannot  compel  his  creditor  to 
accept  anything  but  money  in  payment.  In  reality, 
therefore,  all  debt  ultimately  rests  on  money — it  can  be 
extinguished  only  by  money  if  deman'ded — and  in  times 
of  general  liquidation  there  arises  a  great  demand  for 
money  and  a  general  shrinkage  in  the  values  of  com- 
modities measured  in  money.  Economists  have  long 
Recognized  this  dependence  of  credit  on  money.  Jevons 
says,  writing  as  to  England  alone : 

While  the  elasticity  ot  credit,  then,  may  certainly 
give  prices  a  more  free  flight,  the  inflation  of  credit 
must  be  checked  by  the  well-detined  boundary  of  avail- 
able capital,  which  consists  in  the  last  resort  of  the 
reserve  of  notes,  equivalent  to  gold,  in  the  banking- 
department  of  the  Bank  of  England.  Prices  tempor- 
arily may  rise  or  fall  independently  of  the  quantity  of 
gold  in  the  country;  ultimately  they  must  be  governed 
by  this  quantity.  Credit  gives  a  certain  latitude  with- 
out rendering  prices  ultimately  independent  of  gold.* 

But  more  than  this,  debt — or  credit — does  not  rest 
ultimately  on  all  money,  but  only  on  standard  money. 
A  large  portion  of  the  money  of  the  world  is  credit 
money.  All  paper  money  is  evidence  of  debt.  It  is 
the  promise  of  some  government,  or  some  bank,  to  pay 
in  standard  money.  All  token  money  is  of  the  same 
character,  even  though  it  may  have  an  intrinsic  value 
that  covers  some  part  of  its  face  value.  Hence  all  gov- 
ernments and  all  institutions  that  issue  such  money  are 
in  a  constant  state  of  liquidation,  i.  c,  they  must  be 
ready  always  to  pay  a  standard  dollar  for  the  credit 
dollar  they  have  issued.  If  the  pressure  of  liquidation 
becomes  too   great,  and  they  are  unable  to   maintain 

Note. — Investigations  in  Currency  and  Finance,  p.  32. 


32 

such  exchanges,  they  are  said  to  "  suspend  specie  pay- 
ments," because  the  ordinary  form  of  credit  money  is 
paper.  In  such  cases  the  credit  money  drops  to  a  credit 
value,  or  if  it  have  an  intrinsic  value  it  may  drop  to 
that  value.  When  a  country  adopts  the  single  gold 
standard  the  only  thing  in  which  it  can  redeem  is 
gold,  and  it  is  under  implied  contract  to  redeem  all  its 
credit  money,  whether  paper  or  metal,  in  gold.  In 
other  words  it  must  maintain  its  credit  money  on  a 
parity  with  its  standard  money.  In  the  United  States 
a  question  arose  as  to  the  intention  of  the  government 
in  this  regard  because  the  act  of  1890  provided  that  the 
redemption  of  the  "  coin  notes  "  by  the  Secretary  of 
the  Treasury  should  be  "  in  gold  or  silver  coin,  at  his 
discretion,"  and  it  was  answered  by  both  the  great  poli- 
tical parties  of  the  country  that  they  would  maintain 
all  money  on  a  parity  with  gold.  The  Republican 
party  demanded  that  "  the  purchasing  and  debt  paying 
power  of  the  dollar,  whether  of  silver,  gold,  or  paper, 
shall  be  at  all  times  equal."  The  Democratic  party 
pledged  itself  to  such  "safeguards  of  legislation"  as 
would  maintain  "  the  equal  power  of  every  dollar  at  all 
times  in  the  markets,  and  in  payment  of  debt." 

At  the  time  Mr.  Mees  spoke,  the  debt  of  the  world 
rested  on  values  of  gold  and  silver,  constituting  the 
world's  supply  or  stock,  that  were  nearly  equal,  but 
ultimate  credit  rested  heavier  on  silver  than  on  gold, 
for  there  were  only  two  gold  standard  countries  in  the 
world,  while  there  were  several  silver  standard  countries. 
In  bimetallic  countries  it  rested  on  both  metals,  because, 
although  they  issued  silver  token  money,  they  also 
issued  standard  silver  money,  which  was  money  of 
ultimate   payment,   not    redeemable   in   anything   else. 


33 

What  Mr.  Mees  practically  said  was  :  If  all  the  nations 
adopt  the  gold  standard,  and  reduce  silver  money  to 
token  money,  redeemable  in  gold,  gold  will  appreciate 
in  value.  Why  ?  Because  the  volume  of  debt  resting 
on  silver  will  be  taken  from  it  and  placed  on  gold,  and, 
in  addition  to  that,  the  amount  of  governmental  debt 
represented  by  silver  coins  will  also  rest  on  gold.  Gov- 
ernments will  be  obliged  to  keep  enough  gold  on  hand 
to  maintain  exchanges  for  their  credit  money,  or  they 
cannot  keep  it  at  par.  There  will  be  a  largely  increased 
demand  for  gold.  The  supply  is  limited.  It  must 
appreciate  in  value.  If  you  should  kill  half  of  the 
horses  in  the  world,  the  other  half  would  appreciate  in 
value,  because  there  is  a  certain  amount  of  work  to  be 
done  by  horses,  and  the  decrease  in  number  would  make 
an  abnormal  demand  for  those  that  remained.  It  is  the 
law  of  supply  and  demand.  Increase  the  demand  and 
you  cause  an  increase  in  value  of  the  supply. 

Was  Mr.  Mees  right  ?  Have  the  results  that  fol- 
lowed shown  the  correctness  of  his  view  ?  We  find  a 
great  many  persons  who  contend  that  gold  has  not 
appreciated,  but  that  silver  has  depreciated.  Let  us 
consider  this.  In  the  table  on  p.  27  all  values  are 
measured  in  gold,  and  appear  to  have  fallen.  Of  course 
the  appearanee  would  be  the  same  if  the  commodities 
remained  stationary  and  gold  rose  in  value,  because 
they  are  measured  in  gold.  On  comparing  the  apparent 
decline  of  silver  with  the  apparent  decline  of  other 
articles,  we  find  a  remarkable  uniformity  between  its 
movement  and  the  movement  of  average  prices  as 
shown  in  the  index  numbers  in  columns  3,  4,  5  and  6  of 
Table  1.  Not  only  do  they  fall  together  but,  practically, 
at  certain    periods   they   rise  together.     Why  is  this  ? 


34 

Those  who  claim  that  silver  has  depreciated  in  value 
say  that  the  depreciation  is  due  to  increased  and  cheap- 
ened production.  If  so,  is  it  not  a  most  Extraordinary 
coincidence  that  its  cheapening  has  been  so  uniform 
with  the  average  cheapening  of  other  things,  and  still 
more  so  that  when  other  things  grew  dearer  the  cost  of 
producing  silver  suddenly  increased  ?  Many  advocates 
of  silver  make  a  somewhat  similar  claim.  They  say 
that  silver  has  been  "  a  steadier  measure  of  value  than 
gold."  There  is  nothing  in  the  nature  of  silver  that 
would  make  it  more  stable  than  gold,  and  nothing 
in  the  natural  conditions ;  on  the  contrary  the  demone- 
tization of  silver  would  naturally  tend  to  depreciate  it 
more  than  the  average  of  commodities.  This  uniform- 
ity of  movement  is  not  a  matter  of  chance.  It  is  not 
due  to  any  intrinsic  quality  of  silver.  It  results  directly 
and  necessarily  from  the  use  of  gold  and  silver  as 
money.  It  is  impossible  that  the  value  of  silver  should 
vary  materially  from  the  general  average  of  values  so 
long  as  it  is  standard  money  in  a  part  of  the  commer- 
\  cial  countries  of  the  world,  and  gold  is  the  standard 

money  of  international  commerce. 

Let  me  endeavor  to  make  this  clear,  for  it  is  a  fun- 
damental principle  of  the  utmost  importance.  Countries 
that  have  silver  as  the  standard  money  maintain  free 
coinage  of  silver,  and  therefore  silver  bullion  is  worth 
what  it  would  be  worth  in  the  coin  of  those  countries, 
less  transportation  and  mint  charges,  unless  specially 
affected  by  speculation.  In  the  daily  market  reports, 
for  example,  you  will  find  Mexican  dollars  quoted  at 
their  bullion  value,  because  it  is  practically  the  same  to 
send  Mexican  dollars,  or  so  much  bullion,  to  Mexico.  In 
silver  standard  countries  silver  is  the  measure  of  values. 


t. 


35  ( 

When  you  pass  beyond  the  boundaries  of  those  countries 
both  silver  and  other  commodities  are  measured  in  gold. 
Suppose  that  at  Vera  Cruz  wheat  were  worth  a  dollar  a  / 

bushel   in    Mexican  silver  or  sixty  cents  in   gold.     It  l 

would  be  immaterial  to  the  merchant  there  whether  he 
bought  silver  dollars  or  wheat  with  his  gold,  because  he 
could  exchange  one  for  the  other,  and  he  would  pay  the 
same  for  one  that  he  pays  for  the  other.  But  merchants 
deal  in  other  things  than  wheat,  and  wheat  fluctuates 
in  value  from  causes  peculiar  to  itself;  therefore  the 
value  of  silver  is  measured  by  foreigners  by  its  average 
purchasing  power,  and  as  in  silver  countries  it  is  the 
measure  of  values  its  average  purchasing  power,  and 
the  average  price  of  commodities  are  one  and  the  same 
thing.  Mr.  ISTormau  is  one  of  the  few  economists  who 
have  perceived  this  truth,  and  with  his  characteristic 
devotion  to  "  the  exchanges  "  he  maintains  that  "  an 
altered  relation  of  silver  to  gold  necessitates  an  imme- 
diate adjustment  of  prices  between  countries  possessing 
effective  monetary  systems,  through  the  operation  of 
the  exchanges  of  gold  for  silver  and  silver  for  gold, 
affecting  all  articles  interchanged  between  such  coun- 
tries." In  other  words  the  depreciation  of  silver  would 
cause  a  depreciation  of  all  prices.  As  he  puts  it  else- 
where : 

Is  it  not  a  fact  that,  upon  a  rise  in  the  gold  price  of 
silver,  prices  of  articles  interchanged  between  a  gold 
standard  country  and  a  silver  standard  country  must  be 
adjusted  to  the  changed  relation  between  gold  and 
silver  at  once  ?  Has  it,  or  has  it  not,  been  clearly 
demonstrated  that,  in  consequence  of  the  higher  silver 
price  of  gold  in  silver  standard  countries  since  1873, 
the  adjustment  necessary  has  been  effected  by  a  fall  in 
the  gold  prices  of  commodities,  etc.,  imported  from 
silver  standard  countries?* 


Note. — The  World's  Metal  Monetary  Systems,  pp.  98  and  164.     See  also  pages 
136,  152.  3'o- 


36 

The  incorrectness  of  this  explanation  is  shown  by 
the  fact  that  the  fall  of  prices  has  not  been  confined  to 
commodities  imported  from  silver  standard  countries, 
but  has  occurred,  on  the  average,  with  all  commodities. 
A  depreciation  of  silver  could  not  afiect  prices  in  coun- 
tries where  silver  is  not  standard  money,  any  more  than 
a  depreciation  of  cowry  shells  in  India  could  affect 
prices  of  commodities  in  the  United  States,  or  a  depre- 
ciation of  Zulu  cattle  could  afi:ect  the  price  of  dried  fish 
in  Iceland.  Neither  can  an  appreciation  of  the  price 
of  gold  affect  the  prices  of  commodities  in  silver  stand- 
ard countries,  I.  e.,  as  measured  in  silver  under  existing 
circumstances,  and  it  has  not  done  so.  There  has  been 
a  fall  of  prices  everywhere  if  we  measure  them  in  gold, 
but  there  has  been  no  fall  of  prices  anywhere  if  we 
measure  them  in  silver.  The  tables  given  show  this  as 
to  gold  standard  countries.  The  testimony  from  silver 
standard  countries  is  uniform.  At  the  Brussels  Confer- 
ence of  1892,  the  stabilit}'^  of  silver  prices  in  Mexico 
and  India  was  conceded  by  all.  Mr.  Denby,  our  Minis- 
ter to  China,  has  shown  the  same  condition  in  that 
country.*  The  only  complaint  from  those  countries  is 
the  increased  price  of  exchange,  or  in  other  words  the 
depreciation  of  commodities  and  silver,  as  measured  in 
gold.  Gold  prices  dominate  in  international  commerce, 
because  gold  standard  countries  dominate  in  inter- 
national commerce.  The  commodities  of  silver  stand- 
ard countries  are  subjected  to  the  gold  measure  as  soon 
as  they  become  the  objects  of  export,  and  their  price 
level,  under  the  gold  standard,  is  fixed  by  their  barter 
or  exchange  relation  to  the  commodities  of  the  gold 
standard  countries.     Under  the  influence  of  universal 


Note. — Consular  Reports,  No.  74,  p.  508,  No.  96,  p.  317. 


37 

cheap  transportation  and  quick  communication,  the 
movement  of  prices  is  practically  the  same  throughout 
the  world,  the  chief  variations  being  due  to  speculation, 
which  is  at  times  made  of  considerable  importance 
locally  through  temporary  suspension  of  the  ordinary 
effects  of  ready  transportation.  The  "  corners,"  and 
"  stringencies,"  and  "  pinches  "  of  the  speculative  world 
are  local  and  temporary  in  character.  As  a  rule  the 
London  merchant  buys  and  sells  by  telegraph  in 
America,  Asia,  Africa  and  Australia,  and  as  a  rule 
prices  move  under  telegraphic  influence.  Not  even  the 
daily  papers  furnish  information  quickly  enough  for 
the  business  of  this  era,  but  in  all  commercial  centres 
the  "  ticker"  is  an  essential.  Therefore  we  have  a  gen- 
eral uniformity  of  price  movements  throughout  the 
world,  and  as  silver's  price  in  gold  is  controlled  by  its 
use  as  a  measure  of  value  in  silver  standard  countries, 
we  have  in  silver  a  steady  measure  of  the  movement  of 
gold  prices,  except  as  occasionally  affected  by  specula- 
tion. It  may  be  objected  to  this  that  the  movement  of 
silver  is  not  identical  with  the  movement  of  the  index 
numbers.  It  is  not  exactly  so,  because  none  of  the 
index  numbers  cover  all  commodities.  The  important 
articles  of  real  estate,  live  stock,  labor,  stocks  and 
securities,  and  others,  are  not  included  in  any  of  them, 
but  it  will  be  observed  that  the  broader  the  basis  of  the 
index  number  the  more  closely  it  approximates  the 
silver  movement.  For  twenty  years  the  price  of  silver 
has  been  merely  the  record  of  the  total  average  move- 
ment of  gold  prices,  and  hence  we  may  eliminate  silver 
from  the  discussion  entirely. 

Suppose  that  in  the  United  States  wampum  were 
the  standard  money.     The  price  which  the  foreign  trader 


38 

would  pay  for  wampum  here  would  be  the  value  of  the 
goods  it  would  buy,  and  the  value  of  wampum  abroad 
would  be  its  purchase  power  here,  less  the  cost  of 
bringing  it  here.  An  appreciation  or  depreciation  of 
gold  would  not  afiect  its  purchasing  power.  If  goods 
go  up  abroad  wampum  goes  up.  If  goods  go  down 
abroad,  wampum  goes  down.  But  if  for  any  reason 
there  should  be  a  change  that  afiected  wampum  alone, 
it  would  be  shown  at  once  in  prices  here.  If  a  cheap 
process  of  making  it  were  discovered,  wampum  would 
go  down  and  goods  would  go  up.  And  so  it  is  with 
silver.  So  long  as  that  metal  retains  its  old  relation  to 
the  average  of  prices,  it  is  evident  that  its  appreciation 
or  depreciation  measured  in  gold  merely  registers  either 
a  change  in  gold  or  a  change  in  the  average  of  commo- 
dities. The  real  question  is  whether  gold  has  appre- 
ciated or  the  average  value  of  all  commodities  has 
depreciated.  There  are  some  economists  who  hold  that 
"  the  appreciation  of  gold  and  the  depreciation  of 
prices  are  one  and  the  same  thing."  They  are  the  same 
in  but  one  respect — they  show  the  same  result  when 
gold  is  used  as  the  measure.  But  it  is  important  to 
know  which  movement  has  occurred,  for  if  gold  has 
appreciated  it  is  evidently  due  to  the  governmental 
action  of  demonetizing  silver,  while  if  prices  have 
depreciated  it  has  been  due  to  a  cheapening  of  produc- 
tion or  to  some  sort  of  natural  increase  of  supply.  If 
the  latter  be  true  there  is  'no  remedy,  and  should  be 
none.  If  the  former  be  true  we  should  inquire  if  the 
result  is  detrimental,  and  if  so  governments  should 
correct  the  evil. 

Let  us  consider  the  evidence  as  to  which  movement 
has  occurred.     In  the  first  place  there  appears  an  ade- 


39 

quate  cause  for  the  appreciation  of  gold,  but  no  adequate 
cause  for  a  general  depreciation  of  commodities.  For 
1890  the  world's  stock  of  the  precious  metals  is  esti- 
mated by  Mulhall  at  $6,175,000,000  gold,  and  $6,065,- 
000,000  silver,  coinage  value.  The  officials  of  the  U.  S. 
Mint  report  the  production  of  the  precious  metals  at 
two  billions  each,  gold  and  silver,  from  1873  to  1891 
inclusive.*  In  1870  therefore  the  world's  stock  was 
about  four  billions  of  each,  and  the  credit  of  the  world, 
treating  the  entire  stock  as  money,  rested  on  eight 
billions  of  gold  and  silver.  The  silver  money  stock  of 
silver  standard  countries  is  now  estimated  by  our  mint 
officials  at  $985,000,000.t  All  the  remainder  of  the 
silver  money  of  the  world  is  token  money,  on  a  gold 
basis.  The  credit  of  the  world  therefore  rests  on  a 
metal  stock  of  six  billions  gold  and  one  billion  silver. 
Of  course  the  coin,  or  money  stock,  is  considerably  less 
than  the  total  metal  stock,  and  there  is  certainly  a 
larger  percentage  of  the  metal  stock  in  coin  now  than 
there  was  in  1870,  for  coinage  has  been  in  excess  of 
production  during  these  twenty  years,  as  is  shown  in 
Appendix  1,  but  it  can  hardly  be  doubted  that  the 
volume  of  standard  money  in  the  world  is  less  now 
than  it  was  in  1870.  But  while  the  amount  of  standard 
money  has  decreased,  or  at  the  least  has  not  increased, 
the  volume  of  debt  has  increased  rapidly.  The  period 
from  1870  to  1890  has  been  one  of  great  enterprise  and 
great  extension  of  commerce,  improvement,  and  every- 
thing that  would  naturally  make  debt.  International 
commerce  has  increased  over  50  per  cent.  Domestic 
commerce  has  increased  much  more.  Railroad  mileage 
has  increased  about  200  per  cent.     The  development  of 

••■Note. — See  Appendix  i,  also  "Coinage  Laws,"  3(1  Ed.,  p.  95. 
fNoTB. — See  Appendix  2. 


40 

new  countries  has  been  enormous.  In  addition  to  the 
natural  growth  of  debt  from  these  causes,  we  now  have 
an  additional  burden  of  three  billions  of  token  money 
silver,  and  an  increased  issue  of  about  two  billions  of 
paper  money  resting  on  thestandard  money  stock,  or 
practically  on  gold.  It  is  difficult  to  get  any  just  con- 
ception of  the  amount  of  the  world's  debt.  The  last 
census  gives  the  total  national  debts  of  the  world  at 
twenty-seven  billions  in  1890,  and  seventeen  billions  in 
1870.  The  same  authority  fixes  the  total  public  debt 
of  the  United  States  at  two  billions,  of  which  892  mil- 
lions is  national.  It  is  certain  that  in  this  country  the 
bank  debt  is  greater  than  the  total  public  debt ;  the 
railroad  debt  is  greater  than  the  bank  debt;  the  private 
mortgage  debt  is  greater  than  the  railroad  debt ;  and 
the  open  debt  is  greater  than  the  mortgage  debt.  Pre- 
sumably similar  conditions  exist  elsewhere,  and  we  may 
safely  assume  that  the  volume  of  the  world's  debt  is 
not  less  than  300  billions,  and  that  the  private  debt  has 
increased  from  1870  to  1890  no  less  rapidly  than  the 
national  debts.* 

This  relative  shrinkage  of  the  base  on  which  debt 
rests,  and  by  which  it  must  ultimately  be  extinguished, 
furnishes  a  reasonable  explanation  for  the  increase  in 
value  of  that  base,  but,  on  the  other  hand,  where  is  an 
explanation  for  a  general  fall  in  the  values  of  commod- 

NoTE. — Statistical  returns  indicate  this.  The  mortgage  debt  of  the  "  small 
holdings  "  of  peasants  of  Austria-Hungary  increased  41.89  per  cent,  from  1867  to  1888. 
The  farm  mortgages  of  Denmark  show  an  increase  since  1870  equal  to  7  percent,  of 
the  value  of  the  estates.  The  increase  of  such  debt  in  Prussia  from  1886  to  1889  wai 
342,210,000  marks,  or  nearly  1.5  per  cent  of  the  value  of  the  estates.  The  indebted- 
ness of  the  peasant  proprietors  of  the  Netherlands  increased  from  959,948  florins  in 
1883  to  1,888,872  in  1887,  or  about  97  per  cent.  The  mortgage  debt  of  the  agricultural 
districts  of  Sweden  increased  from  ;C36i507,o64  in  1S77  to  ;£so,797,o77  in  1876,  or  nearly 
40  per  cent.  Publications  of  American  Statistical  Association,  June,  Sept.,  1892,  p. 
iSi  et  seq.  In  the  Political  Science  Quarterly  for  December,  1893,  Mr.  George  K. 
Holmes  makes  a  somewhat  larger  estimate  of  the  existing  debt  of  the  United  States 
than  is  here  presented. 


41 

ities  in  the  past  twenty  years  ?      There  has  been  some 
cheapening  of  processes,  but  these  apply  almost  wholly 
to  manufactures,  and  such  manufactures  show  a  greater 
fall  than  the  average,  as,  for  example,  steel  rails  and  cut 
nails,  in  Table  1.     But  where  is  the  cause  for  the  cheap- 
ening of  agricultural  products?     Is  land  cheaper?     In 
some  places,  yes.     But  such  cheapening  is  either  due  to 
an  exhaustion  of  fertility,  or  it  has  followed  the  cheap- 
ening of  products,  which  made  its  cultivation  unprofit- 
able.   Productive  land  is  not  cheaper.    Is  labor  cheaper? 
Monometallists  say  it  is  dearer,  but  we  shall  find  cause 
to  question  that  hereafter.      If  it  is  dearer  it  would  not 
tend  to  make  agricultural  products  cheaper,  and  cer- 
tainly it  has  not  cheapened  sufficiently  to  cause   any 
great  reduction  in  prices.     Have  we  had  any  revolution 
in   agricultural  machinery  in  twenty  years  ?     No ;  we 
had  reapers,  and  mowers,  and  threshers  in  1870.    There 
has  been  an  improvement  of  machinery  in  some  respects, 
but  nothing  that  could  make  any  such  reductions  of 
prices  as  has  occurred.      Is  the  soil  more  fertile?     No; 
farmers  are  obliged  to  use  fertilizers  more  extensively 
every  year.      Is  production  increased?      Yes;  but  not 
materially  more  than  consumption.      Is  transportation 
cheaper  ?     Yes ;  it  has  fallen  about  one-half  in  the  past 
twenty  years,  but  the  tendency  of  cheaper  transporta- 
tion is  to  reduce  the  price  at  the  point  of  delivery  and 
increase  it  at  the  point  of  production.      If  it  were  not 
for  this,  people  in  a  new  country  would  not  make  dona- 
tions to  induce  the  building  of  railroads,  and  farmers 
would  not  expend  money  for  roads.     As  we  have  seen, 
prices  have  fallen  everywhere.      The  prices  of  agricul- 
tural products,  in  Table  1,  are  export  prices. 

But,  in  the  second  place,  while  there  might  be  some 


42 

question  as  to  the  aggregate  efi'ect  of  these  iiiflueuces 
on  prices,  the  possibility  that  they  have  caused  a  gen- 
eral depreciation  of  commodities  vanishes  when  we 
compare  the  period  of  demonetized  silver  with  other 
periods.  If  there  was  anything  to  cause  a  cheapening 
of  commodities  from  1872  to  1893  it  was  improved 
machinery,  cheapened  transportation  and  new  processes. 
But  these  causes  were  certainly  as  efi'ective  from  1850 
to  1872  as  they  were  from  1872  to  1893,  and  yet  the 
average  prices  of  commodities  advanced  as  steadily  in 
the  earlier  period  as  they  declined  in  the  later  period. 
Examine  this  little  table  of  index  numbers  of  price 
levels  from  Mulhalls  Dictionary  of  Statistics  (p.  491). 


Table 

3. 

Years. 

Jevons. 

London 
Economist. 

Hamburg. 

Soetbeer. 

Average. 

1845-60      - 

-      -     100 

-         100        - 

100       - 

100 

100 

1851-55      - 

-      -      107 



112       - 

114 

111 

1856-GO      - 

-      -      120 

-       127      - 

121       - 

125 

123 

1861-65      - 

-      -      123 



124      - 

127 

125 

1866-70      - 

-      -      121 

-       140      - 

124       - 

125 

127 

1871-75      - 



-       127       - 

133       - 

136 

132 

1876-80      - 

-    

-       115    •  - 

123       - 

127 

122 

1881-84      - 

■    ...... 

-       106       - 

'  118       - 

124 

116 

Here  are  four  independent  records  of  price  levels. 
They  differ  from  each  other  in  exact  amounts  because 
they  do  not  include  the  same  articles,  but  they  all  show 
a  steady  rise  in  the  price  of  commodities  to  the  period 
of  demonetization,  and  a  steady  decline  afterwards. 
There  is  nothing  in  the  relative  efiect  of  cheapening 
transportation,  improving  machinery  or  advance  of  pro- 
cesses, that  is  not  as  true  of  one  period  as  of  the  other. 
There  is  but  one  great  distinction  between  the  two 
periods,  and  it  stands  out  so  plainly  that  none  may  re- 


43 

fuse  to  see  it.  In  the  earlier  period  the  metallic  money 
basis  on  which  credit  ultimately  rests  was  increasing 
with  greater  rapidity  than  ever  before  or  since,  on  ac- 
count of  the  great  gold  discoveries  in  California,  Aus- 
tralia, the  Rocky  Mountain  region  and  elsewhere.  In 
the  later  period  the  metallic  money  basis,  on  which 
credit  ultimately  rests,  was  decreasing  steadily,  as  one 
nation  after  another  demonetized  silver  and  threw  its 
burden  of  credit  on  gold.  This  affirmative  evidence  is 
as  strong  as  could  possibly  be  given  in  such  a  case,  and 
must  be  conclusive  unless  some  opposing  evidence  is 
strong  enough  to  overthrow  it. 

Against  it  several  arguments  have  been  urged. 
The  first  is  that  the  rate  of  interest  has  not  increased. 
This  looks  plausible.  If  money  is  worth  more,  it  would 
naturally  command  larger  hire.  The  fallacy  of  the 
argument  lies  in  the  fact  that  the  money  paid  for  inter- 
est has  increased  in  value  as  much  as  any  other  money, 
and  therefore  interest  has  increased  without  any  ad- 
vance of  rate.  Suppose  that  twenty  years  ago  A  made 
a  loan  of  |100  bearing  five  per  cent,  interest,  and  B 
made  a  loan  of  100  bushels  of  wheat  at  five  per  cent, 
interest,  payable  in  wheat.  This  year  both  came  due. 
A  gets  $200;  B  gets  200  bushels  of  wheat.  A's  $100 
of  interest  has  just  as  much  appreciated  value  as  his 
$100  of  principal.  B's  100  bushels  of  interest  has  just 
as  much  depreciated  value  as  his  100  bushels  of  princi- 
pal. The  appreciation  or  depreciation  of  intrinsic  value 
cannot  be  measured  by  interest  payable  in  kind. 

A  second  argument  is  that  there  is  more  silver 
money  now  than  in  1873,  and  therefore  no  effect  on 
prices  could  have  accrued  from  silver  legislation.  Un- 
questionably the  stock  of  silver  money  is  largely  in- 


44 

creased.  As  shown  in  Appendix  1,  the  world's  coinage 
of  silver  for  twenty  years  has  been  i^  excess  of  the 
world's  production.  Of  course  a  large  amount  of  this 
has  been  recoinage,  but  there  can  be  little  doubt  that 
there  is  now  fifty  per  cent,  more  silver  coin  in  use  than 
in  1873.  The  fallacy  of  the  argument  lies  in  the  fact 
that  this  silver  is  not  standard  money — not  money  of 
ultimate  payment.  The  special  report  of  the  mint  on 
August  16,  1883,  shows  a  total  money  stock  in  circula- 
tion in  this  country  of  $1,631,000,000,  or  $24.34  per 
capita,  which  is  more  than  we  ever  had  before ;  but 
how  much  of  it  is  standard  money  ?  The  stock  consists 
of  $604,000,000  gold,  $615,000,000  silver,  and  $412,000,- 
000  uncovered  paper.  Of  this,  only  the  gold,  which 
amounts  to  $9.01  per  capita,  is  standard  money.  The 
remaining  $15.33  per  capita  is  credit  money,  which  the 
government  is  under  obligations  to  redeem,  i.  e.,  to  keep 
on  a  parity  with  gold.  It  was  this  fact,  coupled  with 
the  facts  that  the  government's  gold  reserve  had  fallen 
to  the  $100,000,000  limit,  and  that  the  government  was 
issuing  paper  money  in  payment  for  silver  bullion  to 
the  amount  of  about  $35,000,000  per  annum,  or  at  the 
rate  of  thirty-five  cents  to  each  dollar  of  gold  reserve, 
that  precipitated  the  panic  of  1893. 

A  third  argument  is  that  some  prices  have  not 
fallen,  and  that  if  there  had  been  an  appreciation  of 
gold  it  would  have  caused  a  decline  in  all  prices  alike. 
So  far  as  it  goes,  the  theory  of  this  proposition  is  cor- 
rect. The  fallacy  lies  in  the  suppressed  assumption 
that  there  could  be  no  special  cause  afl^'ecting  the  value 
of  any  commodity  that  could  counteract  the  effect-  of 
an  appreciation  of  gold.  This  is  manifestly  untrue. 
Everyone  knows  that  the  price  of  any  one  commodity 


45 

is  liable  to  rise  or  fall  under  any  money  system.  Al- 
though there  was  a  general  advance  of  prices  from  1850 
to  1870,  and  although  it  is  conceded  to  be  due  to  a  de- 
preciation of  standard  money,  there  were  a  number  of 
articles  that  decreased  in  price  in  that  period — as  for 
instance,  alkali,  brass,  candles,  cement,  coal,  copper, 
glass,  lead,  paper,  sugar,  etc.  The  obvious  explanation 
of  this  is  that  there  were  causes  operating  to  cheapen 
these  articles  which  more  than  counteracted  the  effects 
of  the  depreciation  of  gold.  So,  in  the  later  period 
there  are  articles,  such  as  coffee.  India-rubber,  and  tin, 
that  have  advanced  in  price,  although  the  average  of 
prices  has  fallen.  The  explanation  must  be  sought  in 
causes  particularly  affecting  such  articles.  The  only 
movement  of  prices  on  which  an  appreciation  or  depre- 
ciation of  money  can  be  predicted  is  a  movement  of 
average  prices. 

A  fourth  argument,  and  one  much  used  in  this 
country,  is  that  wages  have  increased,  and  that  wages 
are  the  best  measure  of  the  appreciation  or  deprecia- 
tion of  money.  This  is  akin  to  the  preceding  argu- 
ment.    It  is  founded  on  this  teaching  of  Adam  Smith  : 

Labour,  it  must  always  be  remembered,  and  not 
any  particular  commodity,  or  set  of  commodities,  is  the 
real  measure  of  the  value,  both  of  silver  (which  was 
then  the  standard  of  English  money)  and  of  all  other 
commodities. 

This  theory  of  Dr.  Smith  has  long  since  been  ex- 
ploded. David  Buchanan,  in  his  edition  of  "  The 
Wealth  of  Nations,''  answers  it  thus : 

The  invariable  value  of  labour  seems  a  metaphysi- 
cal notion,  with  which  Dr.  Smith  has  bewildered  both 
himself  and  his  readers.  The  value  of  labour  is  its 
market  price,  which  varies,  like  that  of  other  commod- 
ities, with  the  state  of  the  supply.    But  if  it  thus  varies 


46 

in  its  own  value,  how  can  it  measure  the  value  of  other 
commodities?  Dr.  Smith  himself  states  that  labour  is 
sometimes  purchased  with  a  greater,  and  sometimes 
with  a  smaller  quantity  of  goods;  but  he  immediately 
adds  that  it  is  the  goods  which  vary  in  their  value,  and 
not  the  labour.  But  why  may  not  labour  vary  in  its 
value  as  well  as  the  goods  ?  Will  not  the  price  of 
labour  vary  with  its  plenty  or  scarcity  ?  And  if  it  varies 
in  its  own  value,  how  can  it  be  an  universal  measure  of 
value  at  different  times  and  places?  There  is,  in  truth, 
no  perfect  measure  of  value.* 

The  fallacy  of  Dr.  Smith's  proposition  is  almost 
self-evident,  for  if  you  admit  it  to  be  true  it  necessarily 
results  than  any  apparent  movement  of  average  wages 
is  in  fact  a  movement  of  money,  and  there  can  never  be 
any  advance  or  decline  of  wages  from  any  other  cause. 
The  merest  amateur  in  economy  knows  that  this  is  not 
true.  In  this  country,  one  political  party  contends  that 
wages  are  advanced  by  a  protective  tariff,  and  another 
that  they  are  advanced  by  improved  machinery,  ex- 
tended commerce,  and  steadier  work.  Workingmen 
hold  that  the  chief  influence  on  wages  is  labor  organi- 
zation. No  one  holds  to  Dr.  Smith's  theory  as  ordinar- 
ily expounded.  Indeed  he  did  not  always  hold  to  it 
himself,  for  he  says  : 

The  money  price  of  labour  in  Great  Britain  has 
indeed  risen  during  the  course  of  the  present  century. 
This,  however,  seems  to  be  the  effect,  not  so  much  of 
any  diminution  in  the  value  of  silver  in  the  European 
market,  as  of  an  increase  in  the  demand  for  labour  in 
Great  Britain,  arising  from  the  great  and  almost  uni- 
versal prosperity  of  the  country. f 

What  Dr.  Smith  evidently  believed  was  that,  other 

things  being  equal,  labor  was  a  good  test  of  prices,  and 

so  it  is,  but  it  was  much  more  so  in  his  time  than  now, 

because  the  causes  which  most  actively  affect  wages 


••'Note. — Volume  i,  p.  59,  note. 
fNoTK. — Ibid,  p.  333. 


47 

now  did  not  prevail  then.  But  what  has  been  the 
movement  of  wages  in  recent  years?  The  best  author- 
ity is  the  report  of  the  Senate  Finance  Committee, 
which,  taking  wages  in  1860  as  a  standard,  shows  the 
movement  of  the  wage-level  to  have  been  as  in  the 
accompanying  table : 

Table  4. 


Year. 

Index  Number 
of  Wages. 

Year. 

Index  Number 
of  Wages. 

1862 

90.8 

1872 

152.2 

1853 

91.8 

1873 

148.3 

1854 

95.8 

1874 

145.0 

1855 

98.0 

1875 

140.8 

1856 

99.2 

1876 

135.2 

1857 

99.9 

1877 

136.4 

1858 

98.5 

1878 

140.5 

1859 

99.1 

1879 

139.9 

1860 

100.0 

1880 

141.5 

1861 

100.8 

1881 

146.5 

1862 

100.4 

1882 

149.9 

1863 

76.2 

1883 

152.7 

1864 

80.8 

1884 

152.7 

1865 

66.2 

1885 

152.7 

1866 

108.8 

1886 

150.9 

1867 

117.1 

1887 

153.7 

1868 

114.9 

1888 

155.4 

1869 

119.5 

1889 

156.7 

1870 

133.7 

1890 

158.9 

1871 

147.8 

1891 

160.7 

These  figures  show  a  steady  increase  of  wages  dur- 
ing the  first  period,  reaching  at  the  close  an  advance  of 
sixty-eight  per  cent.  During  the  second  period  we 
have  first  a  break  in  wages,  and  a  failure  to  regain  the 
original  level  for  ten  years  ;  then  a  stationary  period 
of  five  years ;  then  a  slow  advance,  reaching  at 
the    close    an    increase    of    less    than    six     per    cent. 


,    48 

over  the  beginning.  It  is  certain  that  this  slight  ad- 
vance has  been  changed  to  a  decrease  by  wage  reduc- 
tions in  1892  and  1893,  but  that  is  not  very  material. 
The  essential  point  is,  what  stopped  the  increase  of 
wages'that  was  in  progress  from  1850  to  1870?  All  the 
known  causes  for  increasing  wages  were  evpn  more 
active  in  the  second  period  than  in  the  first.  There  is 
no  imaginable  cause,  aside  from  the  appreciation  of 
money,  why  the  advance  in  the  second  period  should 
not  have  been  as  great  as  in  the  first.  And  in  fact 
wages  did  increase  in  about  the  same  proportion  when 
measured  by  their  purchasing  power,  i.  e.,  by  the  aver- 
age price  of  commodities.  The  retarded  movement 
appears  only  when  measured  in  gold.  The  fact  is,  that 
actual  wages — wages  measured  by  exchange  value — 
have  advanced  very  uniformly  from  1850  to  1891,  and 
that  the  check  in  money  value  is  due  to  the  apprecia- 
tion of  gold.  These  figures,  however,  cover  organized 
labor  and  skilled  labor,  which  get  the  chief  advantage 
from  improved  machinery  and  new  processes.  When 
we  look  at  unskilled  and  unorganized  labor,  the  result 
is  quite  different.  In  this  country  the  class  of  labor 
least  affected  by  these  known  influences,  and  most  like 
the  labor  with  which  Dr.  Smith  was  familiar,  is  agri- 
cultural labor.  Our  government  has  made  nine  special 
investigations  of  agricultural  labor,  at  intervals,  from 
1866  to  1892,  and  the  result  as  shown  by  the  report  of 
the  statistician  of  the  Department  of  Agriculture  is  as 
follows  : 


49 
Table  5, 


Year. 

V 

«  1- 
>  o 

Harvest  Wages 

)er  Day 
Without  Board. 

Harvest  Wages 

per  Day 

With  Board. 

Ordidary  Day 

Wages 
Without  Board. 

Ordinary  Day 

Wages 

With  Board. 

1866 

$26.87 

$17.45 

$2,20 

$1.74 

$1.49 

$1.08 

1869 

25.92 

16.55 

2.20 

1.74 

1.41 

1.02 

1875 

19.49 

12.72 

1.70 

1.35 

1.08 

,78 

1879 

16.05 

10.43 

1.80 

1.00 

.81 

,59 

1882 

18.58 

12.41 

1,48 

1.15 

.93 

,67 

1885 

18.06 

12.34 

1.40 

1.10 

.91 

,67 

1888 

18.24 

12.36 

1.31 

1.02 

.92 

.67 

1890 

18.34 

12.45 

1.30 

1.02 

.92 

.68 

1892 

18.60 

12.54 

1.30 

1.02 

.92 

.67 

It  is  evident  from  these  recorded  facts  that  if  we 
make  wages  the  test  there  has  beeu  an  appreciation  of 
gold  ;  but  let  us  not  be  led  into  the  belief  that  wages 
furnish  the  final  and  accurate  test  of  the  appreciation 
or  depreciation  of  money,  although  the  result  favors 
our  position.  They  are  subject  to  other  influences,  and 
vary  independent  of  the  movements  of  money.  Like 
every  other  commodity,  labor  has  influences  peculiar  to 
itself,  that  affect  it  only,  though  the  results  will  ulti- 
mately react  on  commodities  produced  by  labor.  The 
close  harmony  of  movement  between  the  gold  price  of 
silver  and  the  gold  price  of  any  one  commodity  is  a 
mere  coincidence,  not  a  necessary  result,  for  the  gold 
value  of  silver  measures  average  prices,  under  existing 
conditions,  and  the  harmony  of  price  of  any  commodity 
with  average  prices,  proves  merely  that  it  has  not  been 
subjected  to  any  special  disturbing  cause. 

In  this  consideration  of  the  movement  of  prices, 
thus  far,  we  have  eliminated  silver  from  the  question. 
This   was  done  for   convenience,    not    from   necessity. 


50 

That  there  has,  in  fact,  been  no  decline  in  the  value  of 
silver  from  natural  causes  is  evident  from  three  facts  : 

1.  Those  who  contend  that  silver  has  decreased  iii 
value  assert  that  its  production  is  enormously  increased 
— the  world  has  been  "flooded  with  silver."  In  fact 
the  production  of  silver,  relative  to  the  production  of 
gold,  has  decreased.  During  the  first  half  of  the  pres- 
ent century  the  world's  stocks  of  gold  and  silver  stood 
very  steadily  in  the  ratio  of  1  to  32,  L  e.,  for  every  ton 
of  gold  in  the  possession  of  mankind  there  were  32 
tons  of  silver.  In  1849-50  began  a  great  increase  of 
gold  production,  and  the  amount  of  gold  produced 
annually  continued  to  be  greater  than  the  amount  of 
silver- until  1885,  when  the  world's  stock  stood  in  the 
ratio  of  1  to  18.4.  Since  then  the  production  of  silver 
has  been  slightly  in  excess,  and  the  world's  stock  now 
stands  at  a  ratio  of  about  1  to  18.8.  This  is  the  rela- 
tion in  weight.  In  market  value  the  relation  of  the 
two  metals  varied  but  slightly  until  1872,  when  the 
great  apparent  decline  of  silver  began*,  and  in  1872  the 
weight  ratio  was  about  1  to  20.  It  is  impossible  to  ac- 
count for  a  fall  of  silver,  as  measured  in  gold,  by  increased 
production  of  silver,  when  gold  production  was  increas- 
ing more  rapidly  than  silver  production  at  the  time  the 
apparent  decline  of  silver  began,  and  continued  greater 
than  the  production  of  silver  for  twelve  years  after. 
It  would  require  a  production  of  silver  enormously  in 
excess  of  anything  existing,  or  in  prospect,  to  bring  the 
world's  stock  of  silver  back  to  the  ratio  to  gold  that  it 
held  in  1850. 

2.  It    is  contended  that  silver   has    decreased    in 
value  because  its  production  has  been  cheapened.    This 


Note — See  Appendix  3. 


51 

is  not  correct  as  compared  with  the  production  of  gohl. 
The  cost  of  gold  mining  has  always  been  less  than  the 
cost  of  silver  mining,  and  it  has  decreased  more  on  ac- 
count of  improved  methods.  It  is  well  known  that  in 
California  and  other  places  miners  are  now  working 
profitably  the  "  tailings"  or  refuse  matter  of  the  miners 
of  1850  to  1860.  The  improvement  of  method  in 
placer  mining  has  been  so  great  that  gold  dirt  has  been 
actually  treated  at  a  profit  that  paid  less  than  three  cents 
per  cubic  yard.*  The  difference  in  the  cost  of  produc- 
ing the  two  metals  is  chiefly  due  to  the  fact  that  gold  is 
usually  found  chemically  pure,  while  silver  is  usually 
found  in  chemical  combination  and  mixed  with  other 
metals.  When  pure,  either  metal  can  be  separated  and 
collected  by  amalgamation  with  quicksilver,  or,  as  it  is 
commonly  called,  the  ''  free-milling"  process.  This,  with 
the  possible  exception  of  the  collection  of  gold  nuggets 
by  mechanical  separation,  is  by  far  the  cheapest  pro- 
cess of  separation  known,  and  it  has  been  brought  to  a 
state  of  great  perfection  by  improvement  in  crushers, 
stamps,  amalgamation  plates,  and  other  machinery. 
There  have  been  many  improvements  in  the  processes 
of  silver  extraction,  but  all  processes,  except  free- 
milling  of  native  silver,  require  repeated  handling  of 
the  ore,  which  is  the  greatest  expense  connected  with 
any  process.  Anyone  who  endeavors  to  get  at  the  ap- 
proximate cost  of  silver  production  will  find^j^  remarka- 
ble conflict  in  different  authorities.  The  chief  cause  of 
this  is  the  inclusion  or  exclusion  of  the  value  of  the 
other  metals  found  in  conjunction  with  silver  in  these 
estimates.  More  than  half  of  the  so-called  silver  mines 
of  this  country  could  not  be  worked  at  all  but  for  the 

Note. — U.  S.  Census  Report,  i88o,  Vol.  13,  p.  201. 


52 

value  of  the  lead,  copper  or  gold  they  j'ield  in  addition 
to  the  silver.  Even  the  great  "  Bonanza"  mines  of  the 
Comstock  lode  are  of  this  class.  Their  total  product 
from  their  discovery  to  January  1,  1893,  was  $141,986,- 
344  gold,  and  $198,877,547  silver,  but  the  dividends  in 
the  same  period,  in  excess  of  assessments,  were  only 
$52,478,235.  In  other  words,  the  expenses  have  been 
nearly  $90,000,000  in  excess  of  all  the  silver  produced. 

3.  It  is  claimed  by  many  persons  who  are  advo- 
cates of  the  use  of  silver  that  silver  has  depreciated  in 
value  because  it  has  not  been  coined  as  freely  as  form- 
erly since  1872.  This  is  an  error.  As  shown  by  Ap- 
pendix 1,  the  world's  coinage  of  silver  since  then  has 
been  in  excess  of  its  total  production.  There  has  been 
no  decrease  in  the  demand  for  silver,  but  there  has 
been  an  increase  in  the  demand  for  gold,  owing  to  the 
fact  that  it  has  been  made  the  sole  money  of  ultimate 
payment  in  so  many  countries. 

With  these  preliminary  facts  in  mind,  let  us  now 
consider  the  advantages  or  disadvantages  of  the  ap- 
preciation of  gold. 


IV. 

The  Case  Against  Monometallism. 


The  reader  will  bear  in  mind  that  we  are  to  con- 
sider this  as  a  world  question,  with  only  secondary  ap- 
plication to  any  particular  nation.  In  the  presence  of 
such  fluctuations  in  the  market  relations  of  gold  and 
silver  as  have  prevailed  in  the  last  twenty  years,  it  is 


53 

impossible  that  any  one  nation  should  maintain  bimetal- 
lism at  any  ratio.  Each  one  must  make  its  choice  be- 
tween gold  monometallism" and  silver  monometallism, 
if  action  is  to  be  taken  by  each  singly.  Silver  mono- 
metallism will  never  be  accepted  by  the  leading  nations, 
and  indeed  it  would  be  no  better  than  gold  monometal- 
lism if  it  were  generally  accepted.  The  world  ques- 
tion, therefore,  is  between  gold  monometallism  and  a 
restoration  of  universal,  or  general  bimetallism,  freed 
from  the  known  and  avoidable  evils  of  the  old  bimetal- 
lism. The  position  of  those  who  are  really  entitled  to 
the  name  of  bimetallists,  in  my  opinion,  is  correctly 
stated  by  M.  Boissevain  : 

When,  in  the  years  immediately  preceding  1870,  M. 
Wolowski  and  M.  Cernuschi  began  their  campaign  in 
favor  of  bimetallism,  one  after  the  other  declared  that 
the  system  of  the  double  standard,  to  produce  its  lull 
effect,  must  be  adopted  internationally.  And  since  then 
the  supporters  of  the  movement  have  asked  nothing 
else.  Never,  indeed,  have  the  bimetallists  desired  that 
France  alone,  or  the  Latin  Union,  should  go  back  on  the 
decisions  taken  from  1873  to  1878.  Bimetallism  has 
always  been  defended  as  a  system  which  absolutely 
requires  to  be  adopted  by  a  convention  or  an  under- 
standing of  an  international  character.  It  is  not  too 
much  to  say  that  it  is  precisely  this  which  distinguishes 
bimetallism  from  the  double  standard  system  of  former 
times ;  in  this  respect  it  is  even  directly  opposed  to  the 
old  double  standard  system.* 

In  addition  to  fixing  definitely  what  we  mean  by 
bimetallism,  let  us  also  summarize  and  bear  in  mind 
the  following  conclusions  at  which  we  have  already 
arrived  : 

1.  That  the  real  evil  of  the  old  double  standard 
system  was  the  diversity  of  coinage  ratios,  and  in  a 
smaller  way  the  diversity  of  size  and  alloy  in  coins. 

Note. — 'I'he  Monetary  Question,  English  Ed.,  p.  49. 


54 

2.  That  this  was  the  direct  result  of  legislation, 
and  cau  be  cured  b}'  general  harmony  of  legislation. 

3.  That  during  the  era  of  demonetization  of  silver, 
or  general  adoption  of  the  gold  standard,  there  has  been 
an  almost  continuous  appreciation  of  gold,  and  conse- 
quent decline  of  prices  measured  in  gold. 

4.  That  this  appreciation  of  gold  is  due  to  the  in- 
creased burden  of  credit  placed  upon  it  by  legislation, 
and  not  to  any  natural  cause, 

5.  That  the  market  value  of  silver  merely  marks 
the  average  gold  price  of  commodities,  and  this  is  due 
to  the  legislation  which  makes  it  the  standard  of  value 
in  certain  countries,  and  not  to  any  natural  cause. 

The  English  monometallists  concede  the  apprecia- 
tion of  gold,  and  consequent  depreciation  of  prices. 
Giff'en,  the  greatest  of  them,  admits  it.  Norman  con- 
tends as  zealously  against  the  theories  of  David  A. 
Wells  and  his  followers  as  he  does  against  bimetallism. 
The  records  of  the  London  Economist,  Soetbeer,  Krai, 
Sauerbeck,  and  others,  are  sufficient  for  them.  In  no 
preceding  period  were  statistics  gathered  so  carefully. 
In  none  was  there  such  striking  agreement  in  the 
results  wherever  and  by  whomsoever  ascertained.  The 
figures  speak  for  themselves.  If  we  cannot  believe  them 
we  cannot  rely  on  statistics  for  anything.  The  chief 
argument  of  the  English  monometallists  is  that  a  restora- 
tion of  bimetallism  would  be  an  injury  to  the  creditor 
class.  In  the  sense  that  creditors  would  receive  pay- 
ment for  existing  debt  in  money  that  would  have  less 
purchasing  power  than  the  same  quantity  now  has  is 
true,  because  the  purchasing  power  of  money  has  been 
artificially  increased  by  the  demonetization  of  silver. 
But    if  any    real    injury    resulted    from   this,  which    is 


55 

improbable,  it  would  necessarily  be  offset  by  the  benefit 
received  by  the  debtor  class.  Who  constitute  the  creditor 
class  and  who  the  debtor  class?  The  number  holding 
fixed  and  exclusive  relations  with  either  is  so  small  as 
to  be  insignificant.  Every  man  who  transacts  business 
is  to  some  extent  a  debtor,  and  to  some  extent  a  creditor, 
and  it  is  from  this  fact  that  the  great  evil  of  the  legisla- 
tion towards  a  general  gold  standard  has  resulted.  For 
twenty  years  the  world  has  been  transacting  business 
on  a  falling  market.  There  have  been  some  reactions, 
and  there  have  been  some  lines  of  business  that  have 
not  been  thus  aft'ected,  but  on  the  average  there  has 
been  a  remarkably  steady  trend  downwards — indeed  the 
most  remarkable  movement  of  that  kind  the  world  has 
ever  known.  There  are  few  business  men  who  do  not 
understand  the  injurious  efltects  of  a  falling  market  in 
their  own  affairs.  The  merchant  buys  goods  on  credit; 
the  wholesale  price  goes  down  ;  he  is  forced  to  compete 
with  merchants  who  have  bought  later  at  lower  prices; 
legitimate  profits  are  reduced  ;  debt  and  interest  are  not 
reduced.  The  manufacturer  estimates  the  cost  of  ma- 
terials, labor,  fuel,  etc.;  he  computes  that  on  the  existing 
price  of  goods  he  can  make  a  certain  profit ;  possibly 
he  borrows  money  to  carry  on  his  business;  when  the 
goods  are  ready  for  sale  the  price  has  gone  down.  The 
farmer,  the  packer,  every  man  who  has  to  invest  in  the 
present  and  look  to  the  future  tor  returns  is  similarly 
affected  by  a  falling  market.  Even  bankers  are  fre- 
quently caught  by  the  depreciation  of  the  securities 
they  have  taken.  For  example,  we  are  told  by  mono- 
metallists  that  the  recent  great  bank  failures  of  Austra- 
lia were  due  to  speculation,  booming,  reckless  backing 
of  enterprises,   and   the    like,  but   Australian   bankers 


56 

earnestly  deny  this.     One   of  them,  Mr.  David  Murray, 

says  in  a  recent  article  : 

The  question  is  now  forced  upon  us:  Why  is  it 
that  banking,  which  was  carried  on  successfully  and 
profitably  from  the  earliest  period  of  colonial  history, 
has  in  these  last  days  suffered  such  reverses  ?  I  think 
there  is  only  one  answer  to  the  question,  which  is,  the 
unaccountable  and  continuous  fall  in  the  value  of  all 
securities.  "Clear-sighted  and  practical  financiers " 
did  not  foresee  it,  and  cannot  account  for  it.  Banks 
advanced  on  these  securities  at  a  safe  margin,  quite  as 
safely  as  their  advances  were  made  twenty  to  thirty 
years  ago.  These  margins  have  now  disappeared.  The 
produce  of  the  colonies  has  fallen  in  value  one-half. 
The  estates,  the  runs,  the  mines,  the  farms,  all  pro- 
ducing factors,  have  fallen  in  a  like  ratio,  not  from  scant 
production  but  from  diminished  prices. 

There  is  another  reason  why  banks  have  suffered 
largely  in  the  last  twenty  years.  A  large  portion  of 
the  profit  of  banking  comes  from  loaning  at  interest 
the  greater  part  of  the  money  deposited  by  customers. 
In  times  of  financial  stringency  and  general  panic 
bankers  are  forced  to  call  in  loans  and  hold  heavy  re- 
serves as  protection  against  possible  runs.  This  means 
a  loss  of  ordinary  and  legitimate  profits  to  the  bankers, 
as  well  as  injury  to  customers,  cramping  of  mercantile 
and  manufacturing  business,  discharge  of  laborers,  and 
general  aggravation  of  the  stringency.  Did  you  ever 
consider  how  frequent  and  how  severe  these  periods  of 
stringency  have  been  during  the  era  of  demonetized 
silver?  Mr.  Giffen  noted  it  and  conceded  that  it  was 
due  to  the  unusual  demand  for  gold.  Writing  in  the 
spring  of  1885  he  said  : 

The  course  of  the  money  market  since  1871,  when 
the  German  government  began  to  draw  gold  from  Lon- 
don, has  been  full  of  such  stringencies.  The  crisis  of 
1873  and  1875  were  no  doubt  precipitated  by  them,  and 
since  1876,  in  almost  every  year  except  1879  and  1880, 


57 

there  has  been  a  stringency  of  greater  or  less  severity 
directly  traceable  to,  or  aggravated  by  the  extraordin- 
ary demands  for  gold  and  the  difficulty  of  supplying 
them.* 

Eight  years  have  passed  since  Mr.  GifFen  wrote 
this,  but  there  has  been  no  change  in  the  frequent  re- 
currence of  these  stringencies.  The  results  have  be- 
come more  serious.  The  collapse  of  the  Argentine  Re- 
public's eftbrt  to  adopt  a  gold  basis,  and  the  the  crisis 
produced  by  the  Baring  and  Marietta  failures,  forced 
the  true  cause  on  the  attention  of  financiers,  even 
among  the  most  obstinate  of  English  monometallists. 
In  1892  Alfred  de  Rothschild,  while  insisting  that  the 
gold  standard  was  absolutely  necessary  for  England, 
wrote  to  the  Brussels  international  monetary  confer- 
ence :  * 

Gentlemen,  I  need  hardly  remind  you  that  the 
stock  of  silver  in  the  world  is  estimated  at  some  thou- 
sands of  millions,  and  if  this  conference  were  to  break 
up  without  arriving  at  any  definite  result  there  would 
be  a  depreciation  in  the  value  of  that  commodity  which 
it  would  be  frightful  to  contemplate,  and  out  of  which 
a  monetary  panic  would  ensue,  the  far-spreading  etfects 
of  which  it  would  be  impossible  to  foretell. f 

The  conference  did  not  agree.  The  panic  came. 
What  a  remarkable  fulfillment  of  prophecy  !  And  yet, 
looking  back  over  it  all,  we  see  plainly  that  the  prophet 
either  did  not  fully  understand  or  did  not  fully  express 
the  true  cause.  It  is  impossible  that  mere  depreciation 
of  value  in  silver  should  produce  such  results  as  have 
been  produced.  There  has  been  no  trouble  in  silver- 
standard  countries.  Gold-standard  Australia,  gold- 
standard  United  States,  gold-standard  England,  gold- 
standard   Italy   and  gold-standard   Europe    in    general 

'■'Note. — Essays  on  Fnance,  ad  Series,  p.  26. 
fNoTB. — Proceedings,  p.  73. 


58 

have  suffered,  but  not  silver  standard  countries.  Why  ? 
Because  the  apparent  depreciation  of  silver  means  an 
apparent  depreciation  of  all  prices.  It  is  the  apprecia- 
tion of  gold.  The  gold-standard  countries  are  doing 
business  on  a  falling  market.  This  is  the  legitimate 
and  necessary  result  of  the  policy  of  the  doctrinaires  of 
1867.  This  is  gold  monometallism  so  far  as  it  has  been 
adopted.  What  of  its  further  progress?  When  is  the 
world  to  be  free  from  this  evil  if  the  process  continues? 
The  history  of  the  past  twenty  years  furnishes  some 
light.  As  the  nations  one  after  another  transferred 
their  burden  of  credit  from  silver  to  gold,  gold  appreci- 
ated. The  same  cause  will  produce  the  same  eflect. 
No  wonder  M.  de  Rothschild  so  earnestly  urged  Europe 
to  join  the  Unitefl  States  in  its  effort  to  make  an  arti- 
ficial demand  for  silver.  No  wonder  Great  Britain  in- 
structed its  delegates  to  the  Brussels  conference  "  before 
concluding  that  matters  must  be  left  as  they  are,  to  ex- 
amine with  the  greatest  care  any  plan  which  may  be 
submitted  for  the  purpose  of  extending  the  monetary 
use  of  silver.*  No  wonder  that  Giffen  writes  :  "  Still 
more  we  ought  to  deprecate  any  change  in  silver-using 
countries  in  the  direction  of  substituting  gold  for  any 
part  of  the  silver  in  use."t  The  English  monometal- 
lists  now  realize  the  truth  of  what  Ernest  Seyd  wrote 
in  1871:  "It  is  a  great  mistake  to  suppose  that 
the  adoption  of  the  gold  valuation  by  other  states  be- 
sides England  will  be  beneficial.  It  will  only  lead  to 
the  destruction  of  the  monetary  equilibrium  hitherto  ex- 
isting, and  cause  a  fall  in  the  value  of  silver  from 
which  England's  trade  and  the  Indian  silver  valuation 


=''NoTK. — Proceedings,  p.  113. 

fNoTE.  —  Essays  in  Finance,  ist  Series,  p.  347. 


59 

will  suffer  more  than  all  other  interests,  grievous  as  the 

general  decline  of  prosperity  all  over  the  world  will  be." 

The   position    of  the  English    monometallists   has 

been   that  England  and  a  tew  other  civilized  countries 

ought  to   retain  the  gold   standard,  but  semi-civilized 

countries — among  which  they  seem  to  include  the  United 

States — ought  to    maintain    the    silver   standard.      An 

almost  official  declaration  of  this  ie  found  in  Mr.  Gos- 

chen's  threat  to  the  Paris  monetary  conference  of  1878 : 

The  laissez  /aire  policy  in  India  had  done  more  than 
anything  else  to  keep  up  the  value  of  silver.  If,  how- 
ever, other  States  were  to  carry  on  a  propaganda  in 
favor  of  a  gold  standard,  and  ot  the  demonetization  of 
silver,  the  Indian  government  would  be  obliged  to 
reconsider  its  position,  and  might  be  forced  by  events  to 
take  measures  similar  to  those  taken  elsewhere.  In  that 
case,  the  scramble  to  get  rid  of  silver  might  provoke 
one  of  the  gravest  crises  ever  undergone  by  commerce. 
One  or  two  States  might  demonetize  silver  without 
serious  results,  but  if  all  demonetized  there  would  be  no 
buyers,  and   silver  would  fall  in  alarming  proportions. 

*  *  *  The  American  proposal  for  a  universal 
double  standard  seemed  impossible  of  realization,  a 
veritable  Utopia ;  but  the  theory  of  a  universal  gold 
standard  was  equally  Utopian,  and,  indeed,  involved  a 
false  Utopia.  It  was  better  for  the  world  at  large  that 
the  two  metals  should  continue  in  circulation  than  that 
one  should  be   universally  substituted   for  the  other. 

*  *  *  At  present  there  was  a  vicious  circle ;  States 
were  afraid  of  employing  silver  on  account  of  the  depre- 
ciation, and  the  depreciation  continued  because  States 
refused  to  employ  it.  *  *  *  It  was  not  the  fact  of 
this  stock  of  £15,000,000  (Germany's  discarded  silver) 
being  in  existence  which  depreciated  prices  so  heavily. 
If  this  same  sum  were  in  the  United  States  Treasury  in 
place  of  an  equal  amount  of  gold,  the  aggregate  stock 
of  silver  would  be  unaltered,  but  this  £15,000,000  would 
no  longer  weigh  on  the  market,  and  silver  might  be 
restored  to  a  normal  position.  It  was  in  this  direction, 
and  renouncing  theoretical  discussions,  that  the  States 
interested  ought  rather  to  direct  their  efforts.* 

Note. — Proceedings,  p.  51. 


60 

Strange  to  say,  our  statesmen  adopted  this  policy 
dictated  by  England.  We  put  the  £15,000,000  into  our 
treasury,  and  we  have  put  more  than  £60,000,000  more 
on  top  of  it.  While  we  were  doing  it,  Egypt,  Turkey, 
Roumania,  and  Austria-Hungary  have  gone  to  the  gold 
standard,  and  Argentine  Republic  and  India  have 
attempted  it.  The  appreciation  of  gold  has  gone 
steadily  on.  Our  silver  purchases  did  not,  and  could  not, 
stop  it,  because  we  too  had  the  gold  standard,  and  no 
part  of  our  burden  of  ultimate  credit  rested  on  the 
silver  we  coined.  Now  our  eyes  are  partially  opened, 
and  we  have  decided  that  we  will  no  longer  be  the  cats- 
paw  of  England.  There  is  not  the  slightest  probability 
that  the  LFnited  States  will  resume  the  purchase  system, 
and  scarcely  greater  probability  that  it  will  serve  Eng- 
land's purpose  by  making  silver  standard  money  until 
the  nations  of  the  earth  generally  do  the  same  thing. 

Neither  is  there  any  probability  that  the  present 
silver  standard  countries  will  carry  out  the  English  idea 
by  remaining  on  a  silver  basis.  How  can  they  be  per- 
suaded to  do  so?  They  need  international  money  as 
well  as  the  rest  of  the  world.  Already  India  has 
attempted  to  make  the  change.  Mexico  is  growing 
restive,  and  feels  that  the  premium  of  seventy-four  per 
cent,  on  gold  which  it  encounters  in  international  tran- 
sactions is  an  injury  to  its  commerce.  Japan  and  China 
are  coming  more  and  more  under  Occidental  influences, 
and  are  ambitious  to  range  themselves  in  the  front 
ranks  of  civilization.  They  have  adopted  the  most 
modern  appliances  in  their  navies  and  armies.  They 
are  educating  their  young  men  and  young  women  in 
Europe  and  America.  Thirty-five  years  ago  Japan 
consented  to  open  the  doors  to  civilization.    To-day  the 


61 

shops  of  Japan  are  furnished  with  telephones  and 
lighted  by  electricity.  Nay,  more,  as  I  write  this 
chapter,  the  telegraphic  dispatches  announce  that  the 
Japanese  government  is  considering  ways  and  means 
for  the  adoption  of  the  gold  standard.  It  was  a  wild 
vagary — a  disregard  of  all  human  experience — to  imagine 
that  these  countries  would  stand  against  the  greatest 
of  all  civilizing  forces,  the  international  medium  of 
commerce.  Their  business  interests  protest  daily  against 
such  a  course,  in  the  natural  and  irrepressible  demand 
for  a  currency  of  universal  and  equal  purchasing  power. 
How  can  these  countries  be  kept  from  the  gold  stanard  ? 
Will  it  be  said  that  they  are  not  strong  enough  to  reach 
and  hold  it  ?  They  are  stronger  than  the  countries  of 
Western  Europe,  because  they  are  greater  producers, 
and  because  their  industries  are  not  subjected  to  so 
crushing  a  weight  of  taxation.  These  causes  never  fail 
of  their  effects.  France  is  the  greatest  natural  producer 
of  Western  Europe,  and  France  is  now  recognized  as 
the  strongest,  financially,  of  nations.  The  agricultural 
nations  can  stand  the  strain  of  gold  monometallism 
better  than  others.  They  have  food.  The  nations  that 
must  break  down  first  in  this  struggle  are  the  manufac- 
turing nations  of  Europe.  There  are  but  two  possible 
terminations  to  the  movement  started  by  the  monetary 
conference  of  1867.  One  is  the  adoption  of  the  gold 
standard  by  the  entire  world.  The  other  is  the  adop- 
tion of  international  bimetallism. 

Suppose  the  former  results.  Suppose  we  have 
reached  the  goal.  Suppose  that  through  gigantic  losses 
and  universal  bankruptcy  the  world  reaches  a  point 
where  gold  has  attained  its  maximum  limit  of  appreci- 
ation from  this   cause,  and  prices  have  touched  their 


62 

lowest  point;  have  we  gained  or  lost  by  the  change? 
What  are  the  advantages  of  the  single  gold  standard 
when  the  world  has  it?  The  greatest  excellence  of  any 
kind  of  money  is  stability,  because  money  is  a  measure, 
and  measures  are  of  little  use  unless  they  are  stable. 
Anyone  can  see  the  injury  to  business  that  would  result 
from  a  yard-stick  or  a  bushel  that  fluctuated  constantly 
and  violently  in  size,  and  that  injury  would  be  no 
greater  than  has  been  the  injurj^  from  the  fluctuation  in 
the  measure  of  value  that  has  occurred  in  the  past 
twenty  years.  If  an  universal  single  gold  standard  can 
be  reached,  would  it  be  as  stable  as  the  bimetallic  stand- 
ard ?  For  two  reasons  it  is  impossible  that  it  should  be. 
The  first  is  that  the  contraction  of  the  base  on  which 
credit  rests  necessarily  makes  it  subject  to  more  fre- 
quent and  more  violent  fluctuations.  If  we  should  put 
this  proposition  in  the  reverse  form  and  ask  the  ques- 
tion :  "  Does  inflation  of  credit-money  tend  to  stabil- 
ity ? "  no  sane  man  would  answer  that  it  did.  The 
contraction  of  the  base  on  which  credit  rests  is  the 
same  in  effect  as  the  extension  of  credit  on  an  un- 
changed base.  For  illustration,  if  a  country  has  a 
metallic  fund  of  one  hundred  millions,  and  a  paper 
issue  of  three  hundred  millions,  everyone  would  doubt 
the  safety  of  increasing  the  paper  to  six  hundred 
millions,  but  the  relation  between  the  two  would  be  the 
same  in  that  case  as  if  the  paper  were  left  unchanged 
and  the  metallic  fund  were  reduced  to  fifty  millions. 
The  demonetization  of  silver  is  the  exact  equivalent  of 
inflation,  so  far  as  stability  is  concerned,  not  only  for 
the  reason  stated,  but  also  because  under  it  silver  be- 
comes credit-money  which  must  be  redeemed  in  gold. 
Monometallism  and  inflation  are  equivalents,  and  the 


63 

increase  of  burden  on  the  basis  or  standard  will  always 
cause  greater  fluctuation  in  the  demand  for,  and  value 
of,  the  standard  as  the  expansion  and  contraction  of 
credit  occur. 

In  the  second  place  the  fluctuation  of  value  in  any 
commodity  may  in  fact  be  greater  or  less  than  the  fluc- 
tuation of  average  values,  but  the  great  desideratum  in 
money  is  something  that  will  remain  as  nearly  as  pos- 
sible with  the  average  of  prices,  because  money  is  the 
medium  of  exchange,  and  exchange  or  barter  is  con- 
ducted with  reference  to  average  prices.  In  other 
words  it  is  desirable  that  the  money  substance  should 
be  affected  as  little  as  possible  by  influences  peculiar  to 
itself,  and  not  aflecting  other  commodities.  If  it  were 
possible  to  establish  such  a  standard  the  average  value  of 
all  commodities  would  be  the  fairest  and  best  measure  or 
standard  of  value.  This  is  impossible,  but  it  is  possible 
to  keep  in  a  money  system  the  principle  of  average 
value,  or  in  other  words  to  counteract  to  a  large  extent 
the  natural  fluctuation  that  belongs  to  any  individual 
commodity.  Necessarily  the  average  value  of  two 
commodities  is  less  affected  by  these  individual  causes 
than  the  values  of  the  two  commodities  separately.  If 
the  two  articles  can  be  fastened  together  at  a  fixed 
ratio  of  exchange,  as  gold  and  silver  may  by  universal 
bimetallism,  the  result  will  be  a  money  whose  value  will 
be  the  average  of  the  two.  And  even  if,  as  monometal- 
lists  contend,  and  as  in  fact  occurred  under  the  old  bi- 
metallism with  different  coinage  ratios  in  different 
countries,  a  double  standard  results  in  the  use  of  the 
cheaper  metal  to  the  exclusion  of  the  dearer,  the  use  of 
cheaper  metal  makes  it  dearer  and  the  disuse  of  the 
dearer  metal  makes  it  cheaper,  so  that  the  two  are  natur- 


64 

ally  drawn  together.  Under  either  theory  an  average 
value  of  money  is  preserved  that  is  more  stable  than  the 
value  of  either  metal  alone,  or  of  the  two  maintained 
separately  as  standards  in  different  countries,  as  the 
English  monometallists  recommend. 

This  fact  was  understood  and  explained  by  econo- 
mists before  the  period  of  demonetization,  and  the  con- 
sequent new  aspect  of  the  discussion  of  bimetallism. 
In  the  "Investigations  in  Currencj'  and  Finance" 
written  in  1862,  but  published  after  his^  death,  Mr. 
Jevons  found  it  necessary  to  defend  his  proof  of  a 
depreciation  of  the  value  of  gold  from  1850  to  1860 
from  the  claim  that  if  there  had  been  such  a  deprecia- 
tion it  would  be  shown  by  comparison  with  silver.  In 
reply  he  pointed  to  bimetallism  in  France,  and  said : 

And  80  long  as  there  is  much  silver  coin  current  in 
France,  and  the  law  of  the  year  11  (establishing  bimetal- 
lism) holds,  it  will  be  possible  for  merchants,  b}^  import- 
ing gold  and  exporting  silver,  to  gain  the  difference  of  the 
natural  and  legal  rates  of  value  in  France,  minus  charges 
of  coinage,  insurance,  etc.  Very  correctly  Chevalier 
argues  that  so  long  as  this  state  of  things  lasts,  it  will 
be  impossible  at  London,  Brussels,  Hamburg,  or  even 
at  New  York,  or  any  other  great  center  of  commerce, 
for  gold  to  fall  in  value  much  below  that  of  fifteen  and 
a  half  times  its  weight  of  silver.  On  these  grounds  he 
calls  the  French  silver  currency  a  parachute  which 
retards  the  fall  of  the  value  of  gold.  Here  is  the  great 
oversight.  The  French  currency  may  and  does  prevent 
gold  from  falling  much  below  its  old  relative  value  to 
silver,  but  it  cannot  prevent  both  gold  and  silver  from 
falling  in  value.  The  inevitable  conclusion  drawn  from 
my  table  of  prices  is  that  gold  has  fallen  say  nine  per  cent.; 
silver  has  risen  in  value  compared  with  gold  three  per 
cent.;  the  difference,  six  per  cent.,  must  necessarily  repre- 
sent the  depreciation  of  silver.^ 

In    fact,   both    Jevons    and   Chevalier    are   right. 


Note.— p.  60. 


65 

Silver  fell  with  gold,  but  retarded  its  fall.  Not  France 
alone,  but  the  bimetallic  world  produced  the  result.  As 
we  have  seen,  silver  and  gold  were  prevented  from 
coming  immediately  into  harmony  by  the  Oriental 
valuation  of  silver  at  a  higher  rate  than  the  European 
valuation,  and  as  this  passed  away  the  two  came  together 
again  through  the  decade  of  the  GOs.,  as  may  be  seen 
from  the  table  of  ratios,  Appendix  3.  The  ratio  of 
1870-1872,  is  practically  the  same  as  the  ratio  of  1850- 
1852,  although  the  production  of  gold  was  still  largely 
in  excess  of  the  production  of  silver  at  the  later  period, 
and  the  world's  supply  of  gold,  in  relation  to  silver,  had 
been  almost  doubled. 

Another  very  strong  argument  against  monometal- 
lism is  its  desertion  by  its  adherents.  A  change  of 
opinion  on  a  mooted  question  by  a  single  person 
amounts  to  little,  but  a  strong  trend  in  one  direction 
among  those  who  give  special  attention  to  a  subject  is 
very  good  evidence  of  the  correctness  of  the  position 
to  which  they  come.  At  the  international  conference 
of  1867,  there  was  but  one  delegate,  Mr.  Mees,  the  presi- 
dent of  the  Bank  of  the  Netherlands,  who  protested 
against  the  single  gold  standard.  The  only  other  great 
banker  who  shared  his  views  at  that  time,  of  whom  I 
have  knowledge,  was  Baron  Alphonse  de  Rothschild, 
who  said  in  1869,  "  As  a  sequel,  we  should  have  to 
demonetize  silver  completely.  That  would  be  to  destroy 
an  enormous  part  of  the  world's  capital ;  that  would  be 
ruin."  The  economists  who  took  positions  against  the 
demonetization  movement  may  be  counted  on  the 
fingers.  Prof.  Wolowski,  of  the  College  de  France, 
Cernusclii,  and  Ernest  Seyd  are  the  only  ones  of  note. 
Even  in  1872  and  1873,  when  the  demonetization  meas- 


are  was  before  our  Congress,  not  one  member  of  tbat 
bod}'  raised  his  voice  in  defense  of  the  principle  of 
bimetallism,  though  this  was  perhaps  due  to  oversight, 
as  the  large  majority  of  the  members  certainly  had  no 
idea  of  the  efl'ect  of  the  bill.  What  a  change  has 
occurred  since  then.  In  this  country  the  most  aggres- 
sive advocate  of  gold  monometallism  was  Hon.  John 
Sherman.  He  wrote  to  our  delegate  to  the  conference 
of  1867  strongly  urging  it,  and  condemning  *'  the  impos- 
sible effort  of  making  two  standards  of  value."*  He, 
more  than  any  other  man,  was  responsible  for  this 
country's  joining  in  the  movement.  And  yet,  on  July 
15,  1878,  he  wrote  Mr.  Groesbeck,  one  of  our  delegates 
to  the  conference  of  that  year,  as  follows  : 

During  the  Monetary  Conference  in  Paris,  when 
silver  in  our  country  was  excluded  from  circulation  by 
being  undervalued,  I  was  strongly  in  favor  of  the  single 
standard  of  gold,  and  wrote  a  letter,  which  you  will  find 
in  the  proceedings  of  that  conference,  stating  briefly  my 
view.  At  that  time  the  wisest  among  us  did  not  antici- 
pate the  sudden  fall  of  silver  or  the  rise  of  gold  that  has 
occurred.  This  uncertainty  of  the  relation  between  the 
two  metals  is  one  of  the  chief  arguments  in  favor  of  a 
monometallic  system,  but  other  arguments,  showing  the 
dangerous  effect  upon  industry  by  dropping  one  of  the 
precious  metals  from  the  standard  of  value,  outweigh 
in  my  mind  all  theoretical  objections  to  the  bimetallic 
system.  I  am  thoroughly  convinced  that  if  it  were 
possible  for  the  leading  commercial  nations  to  fix  by 
agreement  an  arbitrary  relation  between  silver  and  gold, 
even  though  the  market  value  might  vary  somewhat 
from  time  to  time,  it  would  be  a  measurr  of  the  greatest 
good  to  all  nations.  My  earnest  desire  is  that  you  may 
succeed  in  doing  this.f 

To    this    sentiment    I    believe   Mr.  Sherman    still 

adheres.     At  least  he  said  in  the  Senate  on  May  31, 1892, 


*NoTE.— Sen.  Doc.  14,  2d  Sess.  40th  Cong.,  p.  107. 
fNoTE.— Proceedin},'s  Paris  Monetary  Conf.  of  1878,  p.  139, 


67 

that  '*Wlien  the  law  of  1873  was  passed  the  only  trouble 
about  it  was  tliat  we  were  not  as  wise  as  the  Almighty 
Ruler  of  the  universe.  We  could  not  see  ahead."  And 
in  a  continuation  of  the  same  speech,  on  June  1,  lie  said 
"  I  am  willing  to  stand  hy  the  President,  to  aid  him  all 
we  can  in  an  international  conference."  We  may  claim, 
therefore,  the  conversion  of  the  leader  of  the  monometal- 
list  forces  in  America.  Outranking  Mr.  Sherman  as 
a  financier,  we  have  Hon.  Hugh  McCuUoch,  who,  in 
1867,  was  Secretary  of  the  Treasury.  He  too  supported 
the  movement  for  gold  monometallism,  though  not  so 
actively  as  Mr.  Sherman.  He  wrote  to  Mr,  Ruggles, 
our  delegate,  congratulating  "  the  conference  on  the 
result  of  its  labors,"*  and  in  his  report  of  November  30, 
1867,  he  referred  the  matter  to  Congress  as  "  fully  dis- 
cussed in  the  separate  report  of  Mr.  Ruggles,"  specially 
indicating  as  one  of  the  points  made  by  Mr.  Ruggles, 
"  The  necessity  of  a  single  standard  exclusively  of  gold. 
The  fallacy  and  impossibility  of  a  double  standard  of 
gold  and  8ilver."t  And  yet,  in  1887,  Mr.  McCulloch 
wrote  this: 

If  Professor  Sumner  had  been  a  banker  at  any 
time  prior  to  1848,  he  would  not  have  gone  so  wide  of 
the  mark  as  he  did  in  saying,  in  the  1885  June  number 
of  the  North  American  Review,  "We  do  not  want  or 
need  silver  as  a  circulating  medium,  and  shall  not 
abandon  it,  because  we  never  had  it."  We  did  have 
it,  and  sooner  or  later  we  shall  have  it  again,  and  with- 
out its  being  degraded.  We  are  not  prepared — the 
world  is  not  prepared  for  the  demenetization  of  either 
gold  or  silver,  nor  can  this  preparation  be  brought  about 
without  the  wiping  out  of  a  very  large  part  of  public 
and  private  debts.  Debts  contracted  when  both  metals 
are  used  as  money  would  be  a  burden  too  heavy  to  be 
borne  when  measured  by  a  single  standard. .j; 

'■■Note.— Sen.  Doc.  14,  2d  Sess.  40th  Cong  ,  p.  82. 

tNoTE.— Report,  pp   XLIIandXLIII. 

|NoTE.— Men  and  Measures  of  Half  a  Century,  p.  iiy. 


68 

When  we  pass  to  the  lesser  lights  we  find  a  verit- 
able hegira  from  bimetallism.  The  congressmen  of 
1873,  one  after  another,  have  declared  that  they  did  not 
understand  or  did  not  know  the  contents  of  the  act  of 
that  year,  and  have  disavowed  faith  in  its  provisions. 
And  this  not  only  of  members  whose  attention  was  not 
specially  called  to  it,  but  even  members  of  the  commit- 
tees of  the  House  and  Senate  who  reported  on  it,  and 
Mr.  Kelley,  who  originally  introduced  the  bill  in  the 
House,  and  who  said  in  support  of  it :  "All  experience 
has  shown  that  you  must  have  one  standard  coin,  which 
shall  be  a  legal  tender  for  all  others,  and  then  you  may 
promote  your  domestic  convenience  by  having  a  subsi- 
diary coinage  of  silver."  I  do  not  believe  that  any  one 
can  point  to  a  dozen  Americans  prominent  in  public 
life,  who  avow  themselves  believers  in  the  principle  of 
monometallism,  though  there  are  still  a  number  of 
economists  and  financial  writers  who  adhere  to  it. 

The  growth  of  bimetallist  sentiment  in  other 
countries  is  quite  as  striking,  when  all  conditions  are 
considered.  The  international  monetary  conferences  of 
1878,  1881  and  1892  furnish  conclusive  proof  of  the 
world-wide  belief  that  something  ought  to  be  done  to 
change  the  existing  condition,  and  the  existing  condi- 
tion is  gold  monometallism,  so  far  as  international  com- 
merce is  concerned.  The  preponderance  of  sentiment 
in  all  of  these  was  for  universal  bimetallism,  and  it  was 
a- growing  preponderance.  The  educational  eflect  of 
these  conferences  has  been  immense,  and  the  world  is 
under  a  debt  of  gratitude  to  Horton,  Allard,  Boissevain 
and  their  colleagues,  who  have  done  so  much  to  clear 
away  the  debris  of  ancient  monetary  fallacies  and  lay 
broad  and  deep  the  foundations  of  a  real  science.     It  is 


69 

natural  that  there  should  have  been  less  progress  in 
Germany  and  England  than  elsewhere,  for  the  people 
of  both  countries  are  characterized  by  a  pugnacious 
obstinacy  that  is  not  easily  reconciled  to  change,  even 
in  the  right  direction.  Neither  can  we  overlook  the 
influence  of  two  phenomenal  men,  Bismarck  and  Glad- 
stone, strong  in  the  glory  of  past  achievements  and  in 
present  political  power,  who  have  resisted  the  move- 
ment. Bismarck,  indeed,  early  expressed  some  disgust 
at  "  the  scramble  for  gold,"  and  recently  is  said  to  have 
been  convinced  of  the  error  of  gold  monometallism. 
Gladstone  has  sanctioned  England's  eitbrt  to  induce 
other  countries  to  endeavor  to  rehabilitate  silver,  but 
nothing  more,  and  it  is  hardly  to  be  expected  that  men 
of  strong  character  would  change  their  views  on  such  a 
question  in  old  age.  ^Nevertheless  bimetallism  has  been 
winning  its  way  in  both  countries.  It  is  commonly 
conceded  that  Germany  will  follow  if  England  will 
join  in  the  movement  for  universal  bimetallism. 

One  of  the  most  striking  conversions  in  England 
was  that  of  Henry  Hucks  Gibbs,  director  and  former 
governor  of  the  Bank  of  England,  delegate  of  England 
to  the  conference  of  1878.  At  that  conference  he  avowed 
himself  ''  a  partisan  of  the  single  gold  standard,"  but 
he  subsequently  had  a  complete  change  of  view,  and 
became  president  of  the  English  Bimetallic  League.  In 
a  public  speech  he  said  : 

Mr.  Goschen  and  I  were  together  on  the  conference 
in  Paris;  both  of  us  were  sturdy  defenders  of  gold 
monometallism,  but  I  have  changed  my  mind.  I  do 
not  say  Mr.  Goschen  has  changed  his  mind,  but  he  has 
somewhat  modified  it. 

While  Mr.  Goschen  does  not  avow  conversion  to 
the  principle  of  universal  bimetallism  he  does  announce 


70 

views  that  concede  nearly  everything  that  bimetallists 
claim.     He  has  gone  this  far  at  a  public  meeting: 

There  is  a  class  of  monometallists  who  say  that  bi- 
metallism is  all  nonsense,  and  they  cannot  understand 
what  it  means,  Now,  I  do  not  think  that  it  is  nonsense 
at  all.  I  think  it  is  a  very  serious  demand  for  a  change, 
which,  if  adopted,  would  produce  very  large  results. 
*  *  *  The  action  of  the  Latin  Union,  the 
action  of  Germany,  the  displacement  of  silver  and  the 
enthronement  of  gold  in  its  place,  in  many  countries, 
have  had  an  immense  effect  in  producing  the  changes 
which  bimetallists  deplore  and  attempt  to  remedy.  So 
far,  it  appears  to  me,  it  can  fairly  be  said  that  the  ac- 
tions of  governments  have  a  distinct  influence  on  the 
question  of  standards,  I  fully  appreciate  the  import- 
ance of  the  question.  I  feel  it  almost  impossible  to  ex- 
aggerate its  importance.* 

The  view  of  Mr.  Goschen  here  expressed  appears 
to  be  very  much  the  most  common  view  of  English  poli- 
ticians who  advocate  the  gold  standard.  At  any  rate 
the  Royal  Commission  on  Gold  and  Silver,  which  re- 
ported in  1888,  and  which  was  composed  of  six  mono- 
metallist  and  six  bimetallists,  assented  unanimously  to 
the  following  proposition  : 

Sec.  107.  We  think  that  in  any  conditions  fairly 
to  be  contemplated  in  the  future,  so  far  as  we  can  fore- 
cast them  from  the  experience  of  the  past,  a  stable  ratio 
might  be  maintained  if  the  nations  we  have  alluded  tot 
were  to  accept  and  strictly  adhere  to  bimetallism,  at  the 
suo'o'ested  ratio.  We  think  that  if  in  all  these  countries 
gold  and  silver  could  be  freely  coined,  and  thus  become 
exchangeable  against  commodities  at  the  fixed  ratio, 
the  market  value  of  silver  as  measured  by  gold  would 
conform  to  that  ratio  and  not  vary  to  any  material  ex-  ■ 
tent. 

It  may  be  mentioned  in  this  connection  that  since 

the  report  of  this  commission  Mr.  Leonard  H,  Court- 


'■'NoTK — Proceedings  Brussels  Conference  of  1892,  p.  224. 

tNoTH. — The    United    Kingdom,    Germany,    the    United    States  and  the   Latin 
Union. 


71 

iiey,  one  of  the   mouometallist    members,   has    openly 
avowed  his  conversion  to  bimetallism. 

Why,  then,  does  not  England  consent  to  universal 
bimetallism?  Simply  because  these  politicians  believe 
that  the  present  condition  is  better  for  England  because 
it  is  a  creditor  nation.  Mr.  Gladstone  put  it  on  that 
ground  in  the  discussion  of  the  question  in  Parliament 
in  February  1893,  and  no  one  could  have  put  it  more 
bluntly.     He  said : 

The  honorable  member  spoke  rather  with  ridicule 
upon  the  proposition  of  this  country  as  the  great 
creditor  country  of  the  world.  It  is  the  great  creditor 
country  of  the  world;  of  that  there  can  be  no  doubt 
whatever;  and  it  is  increasingly  the  great  creditor 
country  of  the  world.  -I  suppose  there  is  not  a  year 
which  passes  over  our  heads  which  does  not  largely  add 
to  the  mass  of  British  investments  abroad.  I  am 
almost  afraid  to  estimate  the  total  amount  of  the  property 
which  the  United  Kingdom  holds  beyond  the  limits  of 
the  United  Kingdom ;  but  of  this  I  am  well  convinced, 
that  it  is  not  to  be  counted  by  tens  or  hundreds  of  mill- 
ions. 

One  thousand  millions  probably  would  be  an  ex- 
tremely low  and  inadequate  estimate.  Two  thousand 
millions,  or  something  even  more  than  that,  is  very 
likely  to  be  nearer  the  mark.  ["Hear!"  "Hear!"] 
1  think  under  these  circumstances  it  is  a  rather  serious 
matter  to  ask  this  country  to  consider  whether  we  are 
going  to  perform  this  supreme  act  of  self-sacrifice.  I 
have  a  profound  admiration  for  cosmopolitan  principles. 
1  can  go  a  great  length  in  moderation  [laughter]  in 
recommending  their  recognition  and  establishment,  but 
if  there  are  these  two  thousand  millions  or  fifteen  hun- 
dred millions  of  money  which  we  have  got  abroad,  it  is 
a  very  serious  matter  as  between  this  country  and  other 
countries. 

We  have  nothing  to  pay  to  them ;  we  are  not 
debtors  at  all ;  we  should  get  no  comfort,  no  consola- 
tion out  of  the  substitution  of  an  inferior  material,  of  a 
cheaper  money,  which  we  could  obtain  for  less  and  part 
with  for  more.  We  should  get  no  consolation,  but  the 
consolation  throughout  the  world  would  be  great. 
[Loud  laughter.] 


7-2 

This  splendid  spirit  of  philanthropy,  which  we  can 
not  too  highly  prize,  because  I  have  no  doubt  all  this  is 
foreseen,  would  result  in  our  making  a  present  of  fift}' 
or  a  hundred  millions  to  the  world.  It  would  be  thank- 
fully accepted,  but  I  think  the  gratitude  for  your  benev- 
olence would  be  mixed  with  very  grave  misgivings 
as  to  your  wisdom. 

Mr.  Gladstone  and  his  followers  have  the  idea  that 
a  money  system  which  increases  the  burden  of  debt 
benefits  the  creditor,  and  they  will  probably  cling  to  it 
unless  the  actual  losses  of  the  creditors,  from  the  break- 
ing down  of  debtors,  show  them  their  mistake.  The  year 
1893  must  have  been  very  instructive  to  them.  Of 
course  the  English  economists,  who  attempt  to  defend 
monometallism  on  principle,  cannot  take  such  a  posi- 
tion. Giffen  was  moved  to  such  wrath  by  the  conces- 
sion of  the  Royal  Commission  quoted  above,  or,  as  he 
says,  by  public  men  Jiolding  similar  views,  that  he  de- 
clares "  it  is  surely  a  scandal  of  the  first  magnitude  that 
men  of  light  and  leading  in  other  respects  should  have 
talked  seriously,  even  if  only  for  a  moment,  of  any 
such  idea  as  the  possibility  of  a  fixed  price  between 
gold  and  silver."*  And  this  is  about  the  only  argument 
left  to  GifiTen's  school  unless  we  may  so  account  his 
further  proposition  :  "  The  only  way,  then,  to  deal 
with  bimetallists  is  to  refer  them  back  to  Adam  Smith 
and  other  expounders  of  the  A  B  C  of  monetary 
science. "t  And  they  do  refer  to  Smith  and  Locke  and 
other  authorities,  seemingly  oblivious  to  the  fact  that 
these  giants  of  their  day  were  discussing  the  money 
system  of  a  single  country  when  other  countries  were 
maintaining  diverse  coinage  ratios.  They  did  not  discuss 
universal  bimetallism  at  all.     Their  views  are  accepted 


*NoTK. — Case  Against  Bimetallism,  p.  131. 
fNOTB.  — /^»rf,  p.  207. 


freely  by  the  bimetallists  of  to-day  as  to  mere  national 
action,  but  we  have  come  to  a  time  when  money  must 
be  recognized  as  an  international,  and  not  merely  a 
national  matter. 

It  must  not  be  imagined,  however,  that  all  English 
economists  follow  Gitten.  On  the  contrary  the  trend 
is  strongly  in  the  opposite  direction.  In  proof  of  this 
I  submit  the  following  statement  of  Prof.  H.  S.  Fox- 
well,  the  distinguished  professor  of  political  economy 
in  University  College,  London,  in  his  recently  pub- 
lished letter  to  M.  de  Laveleye,  the  well  known 
bimetallist : 

Cambridge  University  :  Professor  Alfred  Marshall, 
bimetallist;  Professor  Sidgwick,  bimetallist.  Edin- 
burgh: Professor  Nicholson,  author  of  an  excellent 
book  on  the  subject,  vice-president  ot  the  Bimetallic 
League.  Oxford  :  Thorold  Rogers  admits  the  scarcity 
of  gold,  rejects  bimetallism.  University  College  of 
London  :  H.  S.  Foxwell,  vice-president  of  the  Bimetal- 
lic League.  Nottingham  :  Professor  J.  E.  Symes,  bi- 
metallist. Liverpool:  Professor  E.  G.  Gonner,  vice- 
president  of  the  Bimetallic  League.  Manchester : 
Professor  J.  E.  Munro  admits  the  bimetallic  theory. 
London,  King's  College:  Professor  Edgeworth  inclines 
towards  bimetallism.  >ti  *  *  Whoever  re- 
fuses to  admit  that  a  fixed  ratio  between  gold  and  silver 
can  be  established  and  maintained  by  international 
treaty  is  no  longer  considered  among  us  an  economist. 

This  progress  of  bimetallism — this  steady  process 
of  conversion  of  men  who  study  the  subject — in  such 
marked  contrast  with  the  almost  universal  prevalence 
of  the  monometallist  sentiment  of  1867 — is  surely  good 
evidence  of  the  merit  of  the  bimetallic  theory,  and  it 
also  gives  ground  for  hope  that  the  nations  may  soon 
be  brought  to  the  point  of  abandoning  the  folly  of  the 
past  twenty  years. 


74 

V. 

The  Remedies  Proposed. 


It  is  not  possible  that  events  of  tlie  striking  char- 
acter heretofore  noted  as  having  occurred, in  the  past 
twenty  years,  and  especially  events  so  disastrous  in 
their  nature,  should  occur  without  attracting  the  gen- 
eral attention  of  statesmen,  financiers  and  students  of 
social  economy.  In  all  civilized  nations  they  have  been 
repeatedly  considered  in  legislative  bodies.  Newspapers 
have  found  in  them  topics  for  extended  discussion. 
The  permanent  liter^iture  on  the  subject  has  grown  to 
great  proportions.  More  significant  than  all  these  is 
the  fact  that  since  the  monetary  conference  of  18G7 
three  international  monetary  conferences  have  been  held 
for  the  purpose  of  devising  some  cure  for  the  existing 
evil,  for  the  monetary  conditions  of  the  past  twenty 
years  are  conceded  on  all  sides  to  have  been  evil  and 
productive  of  evil.  Even  more  striking  is  the  fact  that 
monometallists  as  well  as  bimetallists  maintain  that 
there  must  be  a  more  extended  use  of  silver  as  money, 
or  affairs  will  continue  to  grow  worse.  !Naturally  from 
this  great  amount  of  consideration  there  have  come 
numerous  propositions  for  relief,  and  though  these  vary 
greatly  in  their  general  character,  as  well  as  in  detail, 
they  all  group  logically  in  three  classes,  which  we  will 
now  consider  briefly. 

The  first  class  includes  the  various  proposals  for  an 
extension  of  the  use  of  silver,  or  its  equivalent,  as 
token  money,  on  a  gold  basis.  There  are  two  facts 
common  to  all  these  plans  that  deserve  special  notice. 
The  first  is  that  these  are  tlie  plans  ol'  the  monometal- 


75 

lists — monometallistp,  for  though  mauy  who  have 
favored  such  plans  call  themselves  bimetallists,  it  is 
simpl}'  a  contradiction  of  terms  to  speak  of  bimetallism 
on  a  monometallic  basis.  Any  system  that  does  not 
make  silver  a  standard  money — a  money  not  ultimately 
redeemable  in  gold — is  a  monometallic  system.  The 
second  is  that  only  remedial  plans  of  this  character  have 
been  given  any  trial  in  the  past  twenty  years,  and  they 
have  all  failed  most  dismally.  Nor  is  this  strange  if 
we  will  but  bear  in  mind  the  rudimentary  principle 
which  we  have  established  that  the  cause  of  all  the 
trouble  was  taking  the  burden  of  ultimate  credit  oft" 
from  silver  and  placing  it  all  upon  gold.  Necessarily 
no  additional  use  of  silver  on  which  no  burden  of  ulti- 
mate credit  rests  can  relieve  the  pressure  upon  gold. 
On  the  contrary  the  more  silver  token-money  there  is 
issued  the  greater  is  the  burden  of  credit  that  rests 
upon  gold,  and  the  greater  the  demand  for  and  appre- 
ciation of  gold.  As  we  have  already  noted,  the  amount 
of  silver  coined  in  these  twenty  years  has  exceeded  the 
amount  produced,  but  gold  has  continued  to  appreciate 
notwithstanding  this,  and  notwithstanding  that  more 
gold  has  been  coined  than  has  been  produced. 

The  principal  trial  of  plans  of  this  class  has  been 
the  purchase  of  silver  by  the  United  States  under  the 
Allison  (or  Bland)  law  of  1878,  and  the  Sherman  law  of 
1890.  This  policy,  proposed  as  we  have  seen  by  Mr. 
Goschen,  at  the  conference  of  1878,  was  followed  by 
this  country  for  fifteen  years.  Under  it  we  have  accumu- 
lated in  our  treasury  more  than  five  times  as  much 
silver  as  he  then  thought  would  be  necessary  to  restore 
the  old  equilibrium,  but  the  market  ratio  has  constantly 
gone  farther  and  farther  away  from  it.     The  reason   is 


76 

simple.  Both  our  laws  provided  for  the  purchase  of 
silver  at  the  market  rate,  and  coinage  into  token  money 
redeemable  in  gold.  The  market  rate  of  silver,  as  we 
have  seen,  has  merely  marked  the  general  average  of 
gold  prices,  or  in  other  words  the  appreciation  of  gold, 
and  the  purchase  of  silver  has  no  effect  of  retarding 
this;  but  the  coinage  of  silver  as  token  money,  or  the 
issue  of  notes  against  silver  bullion,  adds  to  the  burden 
of  credit  resting  on  gold,  and  appreciates  it  still  more. 
Hence  the  policy  which  we  have  so  persistently  followed 
has  aggravated  the  evil  instead  of  remedying  it,  and  if 
the  nations  had  adopted  the  advice  of  Rothschild  at  the 
conference  of  1892,  the  situation  would  have  been  so 
much  the  worse. 

Second  in  importance  only  to  this,  is  the  plan  of 
issuing  no  bank  notes  or  other  paper  currency  of  small 
denominations,  and  thereby  forcing  a  more  extended 
use  of  silver  in  the  small  transactions  which  make  up 
the  great  bulk  of  the  world's  business.  This  plan  has 
been  followed  by  the  States  of  the  Latin  Union  and 
some  other  European  powers,  and  is  advocated  by  many 
monometallist  "  friends  of  silver  "  in  this  country.  This 
plan  is  not  harmful,  for  the  reason  that  the  burden  of 
credit  placed  on  gold  by  the  issue  of  such  silver  token 
money  is  certainly  no  greater  than  the  burden  of  the 
paper  money  it  displaces  ;  but  at  the  same  time  it  is 
utterly  without  efiect,  for  the  reasons  mentioned  above, 
in  retarding  the  appreciation  of  gold  or  the  deprecia- 
tion of  silver.  The  silver  so  issued  is  not  standard 
money — not  money  of  ultimate  payment — and  is  floated 
only  by  being  constantly  redeemable  in  gold  by  the 
government  that  issues  it. 

Another  proposition  of  this  class  which   has  been 


77 

received  with  considerable  favor  in  this  coiiiitrj,  is  Sec- 
retary Wiiidom's  scheme  for  issuing  government  notes 
against  deposits  of  silver  bullion,  redeemable  in  silver 
bullion  at  its  market  value  when  the  notes  are  presented. 
A  moment's  thought  will  show  any  one  that  this  plan  is 
based  on  the  hypothesis  that  the  source  of  the  money 
trouble  is  a  decline  of  silver — not  an  appreciation  of 
gold.  If  this  hypothesis  were  correct,  this  plan  would 
probably  tend  to  remedy  the  evil,  but  it  is  not  correct. 
What  effect  could  such  a  plan  have  in  reducing  the  pur- 
chasing power  of  gold  ?  Obviously  none.  The  whole 
transaction  is  on  a  gold  basis.  Silver  is  deposited  at  its 
gold  value,  and  paper  is  issued  on  it  at  the  same  rate. 
The  paper  is  redeemable  in  silver  bullion  at  its  gold 
value.  If  gold  continues  to  appreciate,  as  it  certainly 
will  under  existing  influences,  the  government  would 
have  to  purchase  enough  silver  bullion  to  cover  the 
depreciation,  or,  what  is  equivalent,  redeem  in  gold. 
This  could  have  no  more  effect  on  the  movement  of 
gold  than  would  the  deposit  of  wheat,  or  diamonds,  or 
any  other  commodity,  under  similar  circumstances.  It 
is  mere  warehouse  'business,  with  the  disadvantages  of 
subjecting  the  country  to  unlimited  inflation  and  pos- 
sibly sudden  contraction  of  the  volume  of  currency. 
The  fundamental  fallacy  of  all  plans  of  this  class  is  that 
they  are  not  aimed  at  the  real  evil,  but  at  an  imaginary 
one. 

The  plans  of  the  second  class  include  all  proposi- 
tions for  free  coinage  of  silver,  at  a  fixed  ratio,  by  indi- 
vidual nations,  and  this  proposal  has  received  very 
earnest  support  in  the  United  States.  At  the  present 
time  most  of  the  intelligent  advocates  of  this  plan  con- 
cede that  the  inevitable  result   of  its    trial    would    be 


78 

silver  nioiioiuetallisni,  but  insist  tliat  silver  inonometal- 
lisni  is  preferable  to  gold  monometallism.     If  this  were 
the  only  choice,  and   there  were   in   fact   no  hope  of  a 
general  restoration  of  bimetallism,  we  might  reasonably 
agree  with  them,  for  certainly  a  standard  that  under 
existing  circumstances  must  move  with  the  movement 
of  average  prices  is  much  more  desirable  than  a  stand- 
ard under  which  prices  are  utterly  unsettled,  and  under 
which    no   man   can   do   business  with  any  certainty  of 
results.     It  is  hardl}'   worth   while  to   enter   into   any 
argument  to  show  that  the  necessary  result  of  the  free 
coinage  of  silver  by  this  country  alone  would  be  silver 
monometallism.      Our  own    experience    has   shown  us 
that  we   could   not  maintain   actual  bimetallism  when 
our  coinage  ratio  varied  but  a  fraction  from  a  compara- 
tively uniform  market  ratio.    Our  gold  was  carried  away 
under  our  early  overvaluation  of  silver,  and  our  silver 
was  carried  away  under  our  later  overvaluation  of  gold. 
If  any  further  proof  were  needed  of  the  utter  impossi- 
bility   of  maintaining   bimetallism    under   the    present 
extreme  and  violently  fluctuating  market  ratio  it  may 
be  found  in  the  examples   of  the  States  of  the  Latin 
Union,  which  were  obliged  to  abandon  the  attempt,  or 
our   neighbor,    Mexico,    under   whose    bimetallic    laws 
silver  monometallism  is  an  accomplished  result.     The 
only  question  that  is  open,  in  connection  with  a  propo- 
sal for  free  coinage  by  a  single  nation,  is  whether  silver 
monometallism  is  desirable. 

The  greatest  objection  to  it  is  that  it  would  not  be 
a  settlement  of  the  money  trouble.  It  would  leave  us 
farther  from  the  money  of  international  commerce  than 
we  have  ever  been,  and  it  would  leave  us  subject  to  the 
constantly   recurring  demand   for   money  that  is  good 


79 

everywhere.  Tbis  demand  comes  chiefly  from  the  mer- 
cantile classes,  but  unquestionably  there  is  an  earnest 
desire  among  all  classes,  in  the  United  States  for  money 
that  is  good  in  any  part  of  the  world — money  that  does  not 
rest  on  credit — just  as  there  is  in  all  civilized  countries. 
Indeed  one  great  cause  of  objection  to  our  present 
system  of  gold  monometallism,  with  silver  token  money, 
is  that  we  do  not  have  "  an  honest  dollar" — a  dollar 
that  is  good  all  round  the  world.  Our  eagle,  double 
eagle,  half-eagle,  and  quarter-eagle,  are  good  every- 
where, but  our  dollar  is  worth  only  about  sixty  cents  as 
soon  as  it  goes  beyond  our  boundaries,  except  where 
affected  by  a  prospective  return  to  them.  This  objec- 
tion is  not  made  by  gold  monometallists  alone,  but  by 
bimetallists  also.  As  Mr.  Beith  put  it,  on  behalf  of 
the  bimetallists  of  England,  at  the  meeting  at  Man- 
chester, on  October  27,  1892  :  "We  ask  that  the  gov- 
ernment shall  take  measures  in  concert  with  the  other 
great  nations  of  the  world,  to  arrange  one  money  for 
the  commerce  of  the  world — that  is,  that  the  Queen's 
shilling,  the  Queen's  rupee,  and  the  Queen's  dollar,  shall 
run  as  freely  as  the  Queen's  sovereign,  in  every  part  of 
the  Queen's  empire,  and  of  the  world."  This  is  a 
demand  that  is  urged  both  by  the  needs  of  commerce 
and  by  national  pride,  and  there  is  no  reason  for  sup- 
posing that  either  will  be  less  potent  in  the  future  than 
at  present. 

If  now  we  should  pass  to  silver  monometallism  this 
objection  would  be  still  more  forcible.  Under  the  present 
system  we  maintain  relations  witli  the  money  of  inter- 
national commerce  by  constantly  redeeming  our  silver 
money  in  gold,  or  in  other  words,  maintaining  it  on  a 
parity  with   gold;  but  under  silver  monometallism  we 


80 

would  entirely  abandon  the  money  of  international 
commerce,  and  our  own  money  would  become  merely  a 
commodity  to  the  commercial  world,  as  Mexico's  money 
now  is.  There  would  of  course  result  at  least  a  tem- 
porary increase  in  the  value  of  silver,  or  rather  a 
decrease  in  the  purchasing  power  of  gold,  if  we  were  to 
transfer  our  burden  of  credit  from  gold  to  silver,  but  it 
could  not  be  very  large,  and  it  would  probably  be 
quickly  overcome  by  other  nations  passing  from  the 
silver  to  the  gold  standard.  Our  dollar  would  be  worth 
as  much  abroad  as  at  home,  but  it  would  be  worth  only 
the  bullion  value  ef  the  silver  in  it  anywhere,  and  the 
discrepancy  between  this  and  the  value  of  the  gold 
coins  in  multiples  of  its  denomination  would  be  a  con- 
tinual cause  of  dissatisfaction.  Gold  would  be  "at  a 
premium,"  and  the  continual  clamor  whiclf  this  would 
produce  would  prevent  an  adherence  to  the  system. 
This  is  not  a  speculative  assertion.  During  the  past 
twent}'  years  we  have  seen  this  influence  turn  nation 
after  nation  from  the  silver  standard  to  the  gold 
standard,  and  even  now  the  desire  for  money  of  the 
commercial  world's  standard  is  so  strong  in  the  remain- 
ing silver  standard  countries  that  they  will  certainly 
attempt  the  gold  standard  unless  international  bimetal- 
lism is  speedily  accomplished.  In  the  United  States  the 
demand  for  money  of  this  quality  is  now  so  decided  that 
a  silver  standard  could  scarcely  be  considered  a  pos- 
sibility even  if  it  were  in  other  respects  desirable. 

Beyond  this  lies  the  further  consideration  that  this 
remedy  is  not  sufficient  for  the  disorder.  Unless  all  the 
conclusions  that  we  have  reached  in  these  pages  are 
erroneous,  and  unless  all  the  bimetallists  and  advocates 
of  silver  are  mistaken,  the  existing  disorder  is  a  result 


81 

of  the  appreciation  of  gold,  not  a  depreciation  of  silver. 
No  remedy  can  be  effective  unless  it  brings  gold  back 
to  its  former  relation  to  average  prices.  That  relation 
was  destroyed  not  by  the  demonetization  of  silver  by 
any  one  country,  but  by  a  general  demonetization  by 
the  leading  commercial  nations.  It  can  be  restored  only 
by  a  system  which  will  again  place  the  burden  of  credit 
equally  on  gold  and  silver  throughout  the  world.  Of 
course  no  one  country  could  accomplish  this  by  going  to 
a  silver  standard,  but  it  is  urged  that  if  a  strong  nation 
like  the  United  States  were  to  lead  the  way  to  bimetal- 
lism other  countries  would  follow.  It  is  not  to  be  sup- 
posed that  they  would  follow  until  they  saw  the  result 
of  our  attempt,  and  if  the  United  States  were  to  attempt 
free  coinage  of  silver,  and  go  to  a  silver  standard 
as  it  necessarily  must,  the  result  would  discourage 
other  nations  from  attempting  a  similar  course. 
They  would  see  our  attempted  bimetallism  a  failure. 
They  would  see  us  shut  out  from  the  money  of  the 
commercial  world.  Instead  of  leading  the  way  we 
should  block  the  way.  Hence,  as  a  step  towards  the 
restoration  of  bimetallism,  towards  the  rehabilitation  of 
silver,  towards  the  readjustment  of  prices,  free  coinage 
by  any  one  country,  under  existing  circumstances, 
would  be  an  error.  Our  opportunity  to  lead  is  in  the 
way  of  inducing  other  nations  to  take  the  step  with  us. 

The  third  class  of  propositions  includes  those  which 
call  for  bimetallism,  either  universal  or  by  a  number  of 
countries  in  league  under  conditions  that  will  tend  to 
produce  universal  bimetallism.  The  objection  at  once 
made  to  these  is  that  other  countries  will  not  join — that 
England  and  Germany  at  least  would  stand  out  against 
a  proposition  of  this  character.  This  objection  has  been 


82 

considered  sufficient  in   the  past.     Probably  it  is  suffi- 
cient still  to  prevent  an  imniediate  universal  arrange- 
ment.    It  is  primarily  a  question  whether  the  experi- 
ence of  1893  has  been  enough  to  convince  the  moneyed 
power  of  England  that  the  creditor  is  benefited  by  the 
prosperity  of  the  debtor.   But,  supposing  that  a  present 
universal  agreement  is  impossible,  may  not  that  end  be 
ultimately  reached  by  a  present  league  or  union  of  the 
nations  that  desire  a  restoration  of  bimetallism  ?     This 
would  depend  on  two  questions:     (1.)     Could  a  league 
be  formed  that  would  be  strong  enough?     (2.)     Could 
the  league  nations  protect  themselves  against  the  drain 
of  gold  to  the  non-league  countries  that  would  natur- 
ally result  under  the  economic  laws  which  have  been 
heretofore  explained  ?   It  seems  probable  from  the  senti- 
ment expressed  in  the  later  international  monetary  con- 
ferences, and  from  existing  national  relations,  that  the 
countries  of  the  Latin  Union,  Russia,  Spain,  Holland, 
China,  Japan,   Mexico,  and  all   of  Central  and   South 
America  would  join  in  such  a  league  if  an  affirmative 
answer  could  be  given  to  the  second  question.     And 
these    nations  are  certainly  strong   enough,   with  the 
United  States,  to  maintain  bimetallism  if  that  drain  of 
gold  can  be  prevented.     How  can  it  be  prevented  ?    As 
we  have  seen  it  always  arises  from  a  difference  in  money 
systems   that   permits  of  a   profit    from    commerce  in 
money — from  making  one  of  the  money  metals  a  com- 
modity.    If  such  a  league  were   formed,  the  drain  of 
gold  from  league  to  non-league  countries  would  natur- 
ally occur  in  the  form  of  a  practically  direct  exchange 
of  silver  for  gold.     This  could  easily  be  prevented  by 
imposing  on  all  silver,  coined  or   uncoined,  imported 
from  non-league  countries,  a  duty  higher  than  the  differ- 


83 

ence  between  the  market  value  of  silver  and  its  coinage 
value  in  the  league  countries.  This  would  not  only 
prevent  an  exchange  of  silver  for  gold,  but  would  also 
necessitate  the  payment  in  gold  or  commodities  for  all 
goods  shipped  from  league  countries  to  non-league 
countries,  and  therefore  create  a  flow  of  gold  to  the 
league  countries. 

If  this  plan  were  adopted  there  would  still  remain 
three  causes  for  export  of  gold  from  league  countries  to 
non-league  countries  :  (1.)  The  payment  of  existing 
debts  in  gold.  (2.)  The  shipment  of  gold  for  loan  pur- 
poses under  influence  of  a  high  interest  rate  in  non- 
league  countries,  or  for  other  ordinary  money  purposes. 
(3.)  The  payment  of  gold  for  goods.  The  first  of  these 
could  not  well  be  prevented,  so  far  as  gold  contracts  are 
concerned,  but  it  is  not  an  item  of  sufiicient  importance 
to  cause  apprehension.  The  second  would  be  self-com- 
pensating, because  all  such  movements  would  be  in  the 
nature  of  loans,  and  would  have  to  be  repaid  in  kind. 
The  third  is  the  most  important,  and  it  might  be  pre- 
vented either  by  imposing  prohibitory  duties  on  the 
imports  from  non-league  countries,  or  duties  sufliciently 
high  to  discourage  trade  with  them,  and  turn  the  trade 
of  the  league  countries  to  each  other.  In  other  words, 
shut  England  and  Germany,  and  their  dependencies  out 
from  the  commerce  of  the  remainder  of  the  world. 

It  will  be  objected  that  such  a  system  would  be  one 
of  coercion.  This  is  true,  but  it  would  be  a  coercion 
arising  entirely  from  self-defense  against  nations  which 
insist  on  making  an  illegitimate  profit  out  of  money — 
illegitimate  because  money  as  the  medium  of  commerce 
is  properly  a  measure.  There  should  be  no  more  pos- 
sibility of   making  a  commercial    profit    from    money 


84 

than  there  should  be  from  an  open  and  avowed  altera- 
tion of  any  other  measure.  A  dishonest  dollar  is  as 
dishonest  as  a  dishonest  yardstick.  A  fluctuating  dol- 
lar is  as  great  an  evil  as  a  fluctuating  yardstick.  The 
whole  world  is  interested  in  having  money  as  stable  as 
possible,  and  when  England  objects  to  what  her  Royal 
Commission  has  agreed  would  give  stability,  solely  on 
the  ground  that  as  a  creditor  nation  an  abnormally 
appreciated  money  is  a  national  advantage  to  her,  En- 
gland loses  all  moral  right  to  object  to  coercive  meas- 
ures. As  a  matter  of  course  such  a  division  of  the 
world  would  not  last  long.  England  and  Germany 
cannot  exist  without  the  commerce  of  the  world — at 
least  not  so  easily  as  the  world  can  exist  without  them. 
To  save  themselves  they  would  be  obliged  to  join  in  the 
movement,  and  so  universal  bimetallism  would  be  ulti- 
mately secured. 

And  universal  bimetallism  is  worth  a  determined 
effort.  As  the  world  now  stands  it  has  two  standards  of 
value,  gold  and  silver,  and  when  any  nation  passes  from 
one  to  the  other  the  whole  world  feels  the  shock.  No 
nation  can  control  its  own  measure  of  value  while  this 
condition  lasts.  Did  you  ever  consider  the  enormous 
significance  of  this  fact?  The  United  States  adopted 
the  gold  standard  in  1873,  and  the  efiect  of  that  move- 
ment certainly  did  not  last  longer  than  1879,  when  we 
actually  came  to  the  gold  standard  by  the  resumption 
of  specie  payments.  And  yet  since  then  we  have  been 
subjected  to  renewed  appreciation  of  our  standard  and 
renewed  falls  of  prices  as  other  countries  came  to  the 
same  standard,  although  we  have  made  most  strenuous 
efforts  to  prevent  the  appreciation  of  one  metal  by  buy- 
ing another.     It  may  be  objected,  however,  that  our 


85 

efforts  to  befriend  silver  have  caused  our  troubles. 
Very  well.  Look  at  England.  It  has  been  steadily 
true  to  the  golden  idol.  It  has  not  been  trying  to 
bolster  up  silver.  It  has  not  altered  its  standard 
by  any  act  of  its  own.  And  yet  the  action  of 
other  countries  has  altered  its  standard  and  made 
a  fall  of  prices  similar  to  that  in  this  country. 
There  is  no  way  at  present  to  prevent  any  country  from 
adopting  any  standard  it  likes,  and  if  one  desires  a 
change  the  rest  of  the  world  has  no  choice  but  to 
endure  the  consequences.  There  is  but  one  way  to  be 
free  from  this  evil,  and  that  is  for  the  nations  to  come 
to  a  common  standard,  and  adhere  to  it.  There  is  no 
possibility  that  such  standard  should  be  either  metal 
alone.     It  must  be  both,  or  we  must  remain  as  we  are. 

If  universal  bimetallism  could  be  attained  through 
the  preliminary  step  of  a  bimetallic  league,  as  proposed, 
it  would  be  more  beneficial  than  a  direct  advance  to 
that  condition,  for  two  reasons.  In  the  first  place,  a 
league  once  formed,  with  features  of  protection  and 
coercion,  would  serve  to  perpetuate  bimetallism  after  it 
was  secured.  It  would  aftbrd  the  means  of  speedy 
punishment,  by  commercial  exclusion,  to  any  nation 
that  abandoned  the  league  agreement.  This  is  of 
importance,  because  one  of  the  objections  commonly 
urged  to  international  bimetallism  is  the  declaration 
that  there  could  be  no  means  of  enforcing  the  agree- 
ment if  any  nation  should  violate  it.  If  commercial 
exclusion  could  force  England  and  Germany  into 
agreement,  it  would  certainly  be  sufficient  to  prevent 
any  nation  from  abandoning  the  agreement.  In  the 
second  place,  a  league  compact  would  require  fixed 
rules  and  a  representative  body  to  enforce  them,  and  to 


86 

pass  on  questions  of  concern  to  the  league.  This  would 
inevitably  lead  to  further  steps  towards  international 
unity  and  that  "brotherhood  of  man"  which  is  to  the 
best  minds  the  ideal  development  of  the  human  race. 
Indeed,  international  money,  of  itself,  would  have  an 
effect  in  that  direction  that  could  hardly  be  overrated. 
The  race  differences  that  separate  mankind  are  chiefly 
mere  matters  of  custom,  and  this  is  one  matter  of  univer- 
sal importance,  and  which  is  daily  and  hourly  forced  on 
the  notice  of  all  people,  in  which  varying  customs 
could  easily  and  profitably  be  made  uniform.  Success 
in  it  would  be  strong  inducement  to  attempt  similar 
reform  in  other  matters.  It  is,  therefore,  The  "World's 
Silver  Question  in  the  broadest  sense  of  the  term. 


87 


APPENDIX  I. 

The   World's   Production   and  Coinage   of  Gold   and 
Silver  from  1873  to  1892. 


(Special  Report  of  Bureau  of  the  Mint,  August  28,  1893.) 


GOLD. 

SILVER. 

Calendar 

Year. 

Production. 

Coinage. 

Production. 

Coinage. 

1873 

$112,663,249 

$267,630,802 

$94,126,214 

$131,544,464 

1874 

104,674,672 

136,778,387 

95,676,214 

102,931,232 

1876 

102,935,769 

206,340,209 

90,076,214 

123,143,842 

1876 

110,318,358 

213,119,278 

96,600,775 

123,677,164 

1877 

113,947,173 

173,675,556 

81,040,665 

78,402,648 

1878 

119,092,786 

188,386,611 

94,882,177 

161,191,913 

1879 

107,386,421 

90,752,811 

89,080,680 

104,888,313 

1880 

106,436,786 

149,726,081 

96,704,978 

84,611,974 

1881 

103,023,078 

147,015,275 

102,168,364 

108,010,086 

1882 

101,996,640 

99,697,170 

111,802,337 

110,786,934 

1883 

95,392,000 

104,845,114 

116,088,000 

109,306,706 

1884 

101,694,000 

99,432,795 

110,773,000 

96,832,084 

1886 

108,436,600 

95,767.582 

118,446,160 

126,764,674 

1886 

106,163,877 

94,642,070 

120,626,800 

124,864,101 

1887 

106,774,955 

124,992,465 

124,280,978 

163,411,397 

1888 

110,196,916 

134,828,853 

140,706,413 

134,922,344 

1889 

123,489,200 

168,901,519 

162,169,200 

139,242,696 

1890 

120,465,300 

149,095,866 

173,743,000 

151,032,820 

1891 

126,168,800 

119,310,014 

186,174,200 

135,508,083 

Totals  ... 

$2,080,144,679 

$2,752,927,456 

$2,204,166,349 

$2,309,962,273 

88 


APPENDIX  2. 


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W 

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89 


APPENDIX  3. 


The  Market  Ratio  of  Gold  to  Silver  from  1867 

TO  the  Present. 

(The  figures  to  1893  are  from  the  Report  of  the  Director  of  the  MintI) 


Tear 

W 
P 

Year 

.2 

Year 

0 

Year 

o3 

Year 

2 

o' 

tf 

a 

tf 

1687 

14.94 

1729 

14.92  i 

1771 

14.66 

1813 

16.25 

1855 

15.38 

1688 

14.94 

1730 

14.81 

1772 

14.52 

1814 

15.04 

1  1856 

15.38 

1689 

15.02 

1731 

14.94 

1773 

14.62 

1815 

15.26 

1857 

15.27 

1690 

15.02 

1732 

15.09 

1774 

14.62 

1816 

15.28 

1858 

16.38 

1691 

14.98 

1733 

15.18 

1775 

14.72 

1817 

15.11 

1859 

15.19 

i09Z 

i4.yz 

1      ItO-i 

io.sy 

liiO 

14.55 

1818 

15.35 

1860 

15.29 

1693 

14.83 

1735 

15.41 

1777 

14.54 

1819 

15.33 

1861 

15.50 

1694 

14.87 

1736 

15.18 

1778 

14.68 

1820 

15.62 

1862 

15.35 

1695 

15.02 

1737 

15.02 

1779 

14.80 

1821 

15.95 

1863 

15.37 

1696 

15.00 
15.20 
15.07 

1738 

14.91 
14.91 
14.94 

1780 

1781 

1782 

14.72 
14.78 
14.42 

1822 

1823 

1824 

15.80 
15.84 
15.82 

1864 

1865 

1866 

15.37 

1697 

17.39 

15.44 

1698 

1740 

15.43 

1699 

14.94 

1741 

14.92 

1783 

14.48 

1825 

15.70 

1867 

15.57 

1700 

14.81 

1742 

14.85 

1784 

14.70 

1826 

15.76 

1868 

15.59 

1701 

15.07 

1743 

14.85 

1785 

14.92 

1827 

15.74 

1869 

15.60 

1702 

15.52 

1744 

14.87 

1786 

14.96 

1828 

15.78 

1870 

15.57 

1703 

15.17 

1745 

14.98 

1787 

14.92 

1829 

15.78 

1871 

15.57 

1704 

15.22 

1746 

15.13 

1788 

14.65 

1830 

15.82 

1872 

15.63 

1705 

15.11 

1747 

15.26 

1789 

14.75 

1831 

15.72 

1873 

15.92 

1706 

15.27 

1748 

15.11 

1790 

15.04 

1832 

15.73 

1874 

16.17 

1707 

15.44 

1749 

14.80 

1791 

15.05 

1833 

15.93 

1875 

16.59 

1708 

15.41 

1750 

14.55 

1792 

15.17 

1834 

15.73 

1876 

17.88 

1709 

15.31 

1751 

14.39 

1793 

15.00 

1835 

15.80 

1877 

17.22 

1710 

15.22 

1752 

14.54 

1    1794 

15.37 

1836 

15.72 

1878 

17.94 

1711 

15.29 

1753 

14.54 

1795 

15.55 

1837 

15.83 

1879 

18.40 

1712 

15.31 

1754 

14.48 

1796 

15.65 

1838 

15.85 

1880 

18.05 

1713 

15.24 

1755 

14.68 

1797 

15.41 

1839 

15.62 

1881 

18.16 

1714 

15.13 

1756 

14.94 

1798 

15.59 

1840 

15.62 

1882 

18.19 

1715 

15.11 

1757 

14.87 

1799 

15.74 

1841 

15.70 

1883 

18.64 

1716 

15.09 

1758 

14.85 

180O 

15.68 

1842 

15.87 

1884 

18.57 

1717 

15.13 

1759 

14.15 

1801 

15.46 

1843 

15.93 

1885 

19.41 

1718 

15.11 

1760 

14.14 

1802 

15.26 

1844 

15.85 

1886 

20.78 

1719 

15.09 

1761 

14.54 

1803 

lo.-a 

1845 

15.92 

18s7 

21.13 

1720 

15.04 

1762 

15.27 

1804 

15.41 

1846 

15.90 

1888 

21.99 

1721. 

15.05 

1763 

14.99 

1805 

15.79 

1847 

15.80 

1889 

22.09 

1722 

15.17 

1764 

14.70 

1806 

15.52 

1848 

15.85 

1890 

19.76 

1723 

15.20 

1765 

14.83 

1807 

15.43 

1849 

15.78 

1891 

20.92 

1724 

15.11 

1766 

14.80 

1808 

16.08 

1850 

15.70 

1892 

23.72 

1725 

15.11 

1767 

14.85 

1809 

15.96 

1851 

15.46 

1893 

1726 

15.15 

1768 

14.80 

1810 

15.77 

1852 

15.59 

June 

33.34 

1727 

15.24 

1769 

14.72 

1811 

15.53 

1853 

15.33 

Aug 

28.75 

1728 

15.11 

1770 

14.62 

1812 

16.11  1 

1    1864 

15.33 

Oct 

28.25 

MASSACRES  OF  THE  MOUNTAINS. 

A  History  of  ttie  Indian   Wars  of   tine 

Kar   West. 

By  JACOB  PIATT   DUNN. 


A  FEW  PHESS  OPINIONS. 

A  volume  which  in  completeness  of  detail  and  historical 
value,  has  no  equal  in  American  literature. — Keynote,  New 
York. 

Of  the  many  volumes  which  have  been  written  on  our 
Indian  wars,  this  of  Mr,  Dunn  is  entitled  to  rank  among  the 
best,  if  not  as  the  very  best — Critic,  New  York. 

A  book  which  embodies  a  great  deal  of  research,  recounts 
much  straightforward  history,  and  furnishes  enough  of  romance, 
tragedy,  and  pathos  to  stir  by  turns  the  reader's  interest,  pity, 
and  indignation. — Literary  World,  Boston. 

The  most  authentic  and  complete  narrative  we  possess  of  the 
Indian  wars. —  Globe,  Botton. 

A  credit  to  the  author  and  a  valuable  contribution  to  the 
literature  of  our  country. — Standard,  Chicago. 

Full  of  interest. — Lutheran  Observer,  Philadelphia. 

Should  go  into  the  district  school  libraries. — Press,  Troy 
{N.   F.) 

A  volume  on  a  broad  plan — so  broad  as  to  stand  by  itself  in 
recent  literature.  We  cannot  suppress  our  high  appreciation  of 
the  excellence  of  the  volume. — Post,  Hartford. 

Of  fascinating  interest  and  much  value. — Literary  Mirror, 
Williamsiown. 

The  chapters  on  the  wars  of  Colorado  will  not  be  disputed 
by  a  single  resident  of  the  State. —  Times-Republican,  Denver. 

An  historical  work  of  permanent  interest  and  value. — News, 
Indianapolis. 

A  book  of  great  value  to  the  student  of  American  history, 
and  of  permanent  interest  to  the  general  reader. —  Chronicle,  San 
FrancisGo. 


Pvblished  by  HARPER  ^  BROS.    Profusely  illustrated} 
pp.  X.,  784;  ^^0^  illuminated  cloth;  price  $3J6* 


INDIANA. 

A  REDEMPTION  FROM  SLAVERY. 

By  JACOB  PIATT  DUNN. 


A  FEW  PRESS  OPINIONS. 

"  Excepting  Prof.  Johnston's  '  Connecticut '  we  may  pro- 
nounce this  the  most  scholarly  of  the  series.  It  certainly  ranks 
in  the  very  first  grade." — The  Critic,  New  York. 

"  We  can  recommend  Mr.  Dunn's  book  as  a  careful  and  dis- 
passionate study  of  a  department  of  National  history  nowhere 
else  so  fully  analyzed." — Tribune,  New  York. 

It  is  essentially  a  historic  monograph,  and  a  model  of  works 
of  its  class.  It  is  clear,  strong,  and  convincing,  showing  mature 
study  and  patient  research. —  Christian  Intelligencer,  Neiv  York. 

The  volume  is  in  every  respect  one  of  the  most  valuable 
of  an  exceedingly  valuable  series. —  Traveller,  Boston. 

His  style  is  good,  he  is  apt  in  citation  of  authorities,  he  takes 
broad  views,  and  he  has  a  philosophical  aim. — Beacon,  Boston. 

Mr.  Dunn's  methods  are  clear  and  logical. — Record,  Phila- 
delphia. 

In  writing  a  book  on  his  own  State,  Mr.  Dunn  has  evidently 
taken  special  pride  in  making  it  as  attractive  as  possible.  For 
years  he  has  delved  among  the  archives  of  the  Indiana  Histori- 
cal Society,  of  which  he  is  an  ofiicer,  and  into  the  literature 
bearing  upon  the  early,  romantic  period  in  Indiana's  history, 
until  he  has  been  able  to  give  to  many  of  his  pages  the  fascina- 
tion of  a  fairy  tale. —  Capitol,  Washington. 

The  story  is  beautifully  told.  Home  life  is  represented. 
Customs  and  dress  and  methods  of  labor  are  described.  We 
have  a  genuine  history  of  the  first  people  of  that  great  region. — 
Public   Opinion. 

At  times  his  history  is  as  absorbing  as  a  novel. —  Crayon 
Bleu. 

The  author  writes  with  a  firm  grasp  on  his  subject,  and 
shows  tho  growth  and  development  of  his  State  in  a  very  bril- 
liant and  spirited  manner. —  Chronicle,  Quebec,  Canada. 


Published  by  HO  VGHTON,  IIIFFLIN ^  CO.,  in  Amer- 
ican Commonwealth  series.  Map,  pp.  viii.,  4^3 ;  8vo, 
cloth;  price  ^ISS. 


UC  SOUTHFRr.  RFGIU^AL  LifiRAfU  f'-'JL    Y 


AA    000  593  806    3 


